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Cap 41 - INSURANCE COMPANIES ORDINANCE 1

Chapter: 41 INSURANCE COMPANIES ORDINANCE Gazette Number Version Date

Long title 30/06/1997

To regulate the carrying on of insurance business including regulating insurance intermediaries, to provide for the

appointment of an Insurance Authority, to confer powers of authorization and intervention on the InsuranceAuthority in respect of insurers and insurance intermediaries and to require insurers and insurance intermediariesto furnish financial statements and other information to the Insurance Authority; and for matters incidentalthereto or connected therewith.

(Amended 76 of 1994 s. 2)

[30 June 1983] L.N. 203 of 1983

(Originally 6 of 1983)

Part: I PRELIMINARY 30/06/1997

Section: 1 Short title 30/06/1997

This Ordinance may be cited as the Insurance Companies Ordinance.

Section: 2 Interpretation 30/06/1997

(1) In this Ordinance, unless the context otherwise requires-

"Advisor" (), in relation to an insurer, means the person appointed, pursuant to section 35(2)(a), to be the

Advisor of the insurer; (Added 51 of 1992 s. 2)

"annuities on human life" () does not include superannuation allowances and annuities payable out of any

fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in anyparticular profession, trade or employment, or of the dependants of such persons;

"appointed insurance agent" () means an insurance agent appointed by and registered with an

insurer as an agent; (Added 76 of 1994 s. 3)

"authorized" (), in relation to an insurer, means authorized under section 8, or deemed under section 61(1) or

(2) to be so authorized, to carry on insurance business, and "authorization" () has the corresponding

meaning;

"authorized insurance broker" () means an insurance broker who is-

(a) authorized by the Insurance Authority under section 69; or(b) a member of a body of insurance brokers which is approved by the Insurance Authority under section

70; (Added 76 of 1994 s. 3)

"body corporate" () includes a body incorporated outside Hong Kong;

"chief executive" () has the meaning assigned to it by section 9(2);

"class" (), in relation to insurance business, means a class of insurance business which under section 3 is relevant

for the purposes of this Ordinance;

"client monies" () means monies an insurance broker has received from or held on behalf of a policy holder

or potential policy holder and to which he is not entitled; (Added 76 of 1994 s. 3)

"code of practice" () means a code of practice approved by the Insurance Authority under section 67;

(Added 76 of 1994 s. 3)

"company" () has the meaning assigned to it by section 2(1) of the Companies Ordinance (Cap 32) and includes a

company incorporated outside Hong Kong to which Part XI of that Ordinance applies;

"controller" () has the meaning assigned to it by section 9, but does not include a Manager; (Amended 51 of1992 s. 2)

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"director" () includes any person occupying the position of director by whatever name called;

"financial year" (), in relation to a body corporate, has the meaning assigned to it by section 2(1) of the

Companies Ordinance (Cap 32);

"former accountant" () means a person who was formerly the accountant of an insurer or a former

insurer; (Added 59 of 1993 s. 2)

"former actuary" () means a person who was formerly the actuary of an insurer or a former insurer;(Added 59 of 1993 s. 2)

"former auditor" () means a person who was formerly the auditor of an insurer or a former insurer;

(Added 59 of 1993 s. 2)

"former insurer" () means a person who was formerly an insurer; (Added 59 of 1993 s. 2)

"general business" () means insurance business not being long term business;

"gross premium income" () has the meaning assigned to it by section 10(4)(c);

"holding company" () has the meaning assigned to it by section 2(7) of the Companies Ordinance (Cap 32);

"insurance agent" () means a person who holds himself out to advise on or arrange contracts of insurance

in or from Hong Kong as an agent or subagent of one or more insurers; (Added 76 of 1994 s. 3)

"Insurance Authority" () means the Insurance Authority appointed under section 4;"insurance broker" () means a person who carries on the business of negotiating or arranging contracts of

insurance in or from Hong Kong as the agent of the policy holder or potential policy holder or advising onmatters related to insurance; (Added 76 of 1994 s. 3)

"insurance intermediary" () means an insurance agent or an insurance broker; (Added 76 of 1994 s. 3)

"insurer" () means a person carrying on insurance business but does not include Lloyd's;

"Lloyd's" () means the society of underwriters known in the United Kingdom as Lloyd's;

"long term business" () means any of the classes of insurance business specified in Part 2 of the First

Schedule;

"Manager" (), in relation to an insurer, means the person appointed, pursuant to section 35(2)(b), to be the

Manager of the insurer; (Added 51 of 1992 s. 2)"policy" ()-

(a) in relation to long term business, includes an instrument evidencing a contract to pay an annuity uponhuman life;

(b) in relation to insurance business of any other class, includes any policy under which there is for thetime being an existing liability already accrued or under which a liability may accrue;

"policy holder" () means the person who for the time being is the legal holder of a policy for securing a

contract with an insurer, and-(a) in relation to such long term business as consists in the granting of annuities upon human life, includes

an annuitant; and(b) in relation to insurance business of any other kind, includes a person to whom, under a policy, a benefit

is due or a periodic payment is payable;"premiums receivable" () has the meaning assigned to it by section 10(5);

"prescribed" () means prescribed by regulations made under section 59; (Amended 35 of 1996 s. 2)

"prescribed person" () means-

(a) an auditor, former auditor, actuary or former actuary-(i) of an insurer or a former insurer; and(ii) appointed under section 15 or paragraph 4(1A) of Part 1 of the Third Schedule; or (Amended 26

of 1994 s. 2)(b) an accountant, former accountant, actuary or former actuary-

(i) of an insurer or a former insurer; and(ii) appointed by the insurer or former insurer, as the case may be, in compliance with a requirement

under section 35(1); or (Added 59 of 1993 s. 2. Amended 76 of 1994 s. 3)(c) an auditor or former auditor of an insurance broker or a former insurance broker appointed under

section 72; (Added 76 of 1994 s. 3)

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"subordinated loan stock" (), in relation to a company, means a loan which in the event of the winding

up of the company is repayable by the company only after all of the liabilities of the company, other than thosein respect of share capital, have been paid in full;

"subsidiary" () has the meaning assigned to it by section 2(4), (5) and (6) of the Companies Ordinance (Cap

32);

"working day" () means any day other than a public holiday or a gale warning day as defined in section 71(2)of the Interpretation and General Clauses Ordinance (Cap 1). (Added 25 of 1994 s. 2)

(Amended 25 of 1994 s. 2)(2) References in this Ordinance to an insurer include references to an insurer formed or established in Hong

Kong and carrying on insurance business outside Hong Kong, whether or not the insurer is also carrying on insurancebusiness in Hong Kong.

(3) For the purposes of this Ordinance, a person shall be deemed to carry on a class of insurance business in orfrom Hong Kong if-

(a) he opens or maintains an office or agency in Hong Kong for the purpose of carrying on that class ofinsurance business in or from Hong Kong; or

(b) he holds himself out as carrying on that class of insurance business in or from Hong Kong.(4) A person shall not be deemed to carry on insurance business in or from Hong Kong by reason only that any

person acts as his agent for the purpose of settling claims under contracts of goods in transit insurance entered intowholly outside Hong Kong in respect of goods consigned to Hong Kong.

(5) A person shall not be deemed to be within the meaning of any provision of this Ordinance a person inaccordance with whose directions or instructions the directors of a company or other body corporate or any of themare accustomed to act by reason only that the directors of the company or body act on advice given by him in a

professional capacity.(6) An insurer which is a company shall be subject to the Companies Ordinance (Cap 32) as well as to this

Ordinance, except that, where there is any conflict or inconsistency between the Companies Ordinance (Cap 32) andthis Ordinance, the provisions of this Ordinance shall prevail. (Added 51 of 1992 s. 2)

(7) For the purpose of this Ordinance-

(a) "captive insurer" () means a company ("relevant company") which carries on

general business only and such business-(i) does not relate to any liabilities or risks in respect of which persons are required by any

Ordinance to be insured; and(ii) is restricted to the insurance and reinsurance of risks of the companies within the same grouping

of companies to which the relevant company belongs;(b) the following companies shall be regarded as within the same grouping of companies to which the

relevant company belongs-(i) a company ("first company") which belongs to the relevant company's group of companies;(ii) a company ("second company") in respect of which the relevant company or the first company

holds, or is entitled to control the exercise of, not less than 20% but not more than 50% of thevoting power at any general meeting of the second company;

(iii) a company ("third company") where the third company is a subsidiary of the second company;

(c) "group of companies" ()has the meaning assigned to it under section 2 of the CompaniesOrdinance (Cap 32). (Added 29 of 1997 s. 2)

Section: 3 Classes of insurance business 30/06/1997

(1) The classes of insurance business relevant for the purposes of this Ordinance shall be those specified in theFirst Schedule and the provisions of that Schedule shall have effect accordingly. (Amended 59 of 1993 s. 3)

(2) A contract (including a tontine) referred to in Part 2 or 3 of the First Schedule which is not, but for thissubsection, a contract of insurance shall, for the purposes of this Ordinance, be deemed to be a contract of insurance,and the provisions of this Ordinance shall have effect accordingly. (Added 59 of 1993 s. 3)

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Section: 4 Insurance Authority 31 of 1999 01/07/1997

Remarks:Adaptation amendments retroactively made - see 31 of 1999 s. 3

(1) The Chief Executive shall appoint a public officer to be the Insurance Authority for the purposes of this

Ordinance.(2) The Chief Executive may give directions generally or in a particular case with respect to the exercise by the

Insurance Authority of any of his functions under this Ordinance, and the Insurance Authority shall comply with anysuch direction.


Section: 4A Functions of Insurance Authority 30/06/1997

(1) The principal function of the Insurance Authority shall be to regulate and supervise the insurance industryfor the promotion of the general stability of the insurance industry and for the protection of existing and potential

policy holders.

(2) Without limiting the generality of subsection (1), the Insurance Authority shall-(a) be responsible for supervising an insurer's and an insurance intermediary's compliance with theprovisions of this Ordinance;

(b) consider and propose reforms of the law relating to insurance business;(c) promote and encourage proper standards of conduct and sound and prudent business practices amongst

insurers;(d) promote and encourage proper standards of conduct of insurance intermediaries and, where necessary,

review and revise the regulatory system for the same;(e) promote and develop self-regulation by market and professional bodies of the insurance industry; and(f) co-operate with and assist financial services supervisory authorities of Hong Kong or of any place

outside Hong Kong, whenever appropriate, to the extent permitted by this Ordinance.(3) The Insurance Authority may from time to time cause to be prepared and published by notice in the

Gazette, for the guidance of authorized insurers, insurance intermediaries, and the auditors and actuaries of suchinsurers and intermediaries, guidelines not inconsistent with this Ordinance, indicating the manner in which he

proposes to exercise functions imposed or conferred upon him by this Ordinance.(Added 75 of 1995 s. 2)

Section: 5 Register of insurers 30/06/1997

(1) The Insurance Authority shall keep a register of authorized insurers which shall contain-(a) the name, place of incorporation and year of first authorization (whether under this Ordinance or any

Ordinance repealed or amended by this Ordinance) of every authorized insurer;(b) in respect of each authorized insurer, the class or classes of insurance business authorized to be carried

on by such insurer and any conditions imposed under section 8(1)(a) which impose restrictions on the

class or classes of insurance business authorized to be carried on by that insurer; (Amended 34 of1988 s. 2; 75 of 1995 s. 3)

(c) where an authorized insurer ceases to effect contracts of insurance of any description, or anyrequirement is imposed in respect thereof under section 27, a note to that effect;

(d) where any requirement is imposed on an authorized insurer under section 30, or a Manager,provisional liquidator, liquidator or receiver is appointed, a note to that effect; and (Amended 51 of1992 s. 3)

(e) where an authorized insurer ceases by virtue of a direction under section 40 to be authorized to carryon insurance business which is part of a class of insurance business, a note to that effect. (Added 34 of1988 s. 2)

(2) The register shall be kept at the office of the Insurance Authority or such other place as he may specify bynotice in the Gazette.

(3) Any person shall be entitled on payment of the prescribed fee-(a) to inspect the register during ordinary office hours and take copies of any entry therein;

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(b) to obtain from the Insurance Authority a copy, certified by or under the authority of the InsuranceAuthority to be correct, of any entry in the register.

(4) The register required under this section may be kept by recording the matters in question-(a) in bound books or any other legible form; or(b) otherwise than in a legible form so long as the recording is capable of being reproduced in a legible

form,but where such register is kept otherwise than by making entries in a bound book, adequate precautions shall be takenfor guarding against falsification and facilitating its discovery.

Part: II AUTHORIZATION 30/06/1997

Section: 6 Restriction on carrying on of insurance business 30/06/1997

(1) No person shall carry on any class of insurance business in or from Hong Kong except-(a) a company authorized under section 8 to carry on that class of insurance business;(b) Lloyd's;

(c) an association of underwriters approved by the Insurance Authority. (Amended 25 of 1994 s. 3)(2) Where an application for approval under subsection (1)(c) is made, the applicant shall furnish such

information in respect thereof as the Insurance Authority may require. (Amended 25 of 1994 s. 3)(3) A person who contravenes subsection (1) commits an offence and is liable-

(a) on conviction upon indictment to a fine of $2000000 and, in the case of an individual, to imprisonmentfor 2 years; and

(b) on summary conviction to a fine of $200000 and, in the case of an individual, to imprisonment for 6months,

together with, in either case, a fine of $2000 for each day on which the offence continues. (Amended 35 of 1996 s. 3)

Section: 6A Contracts of insurance entered into in contravention ofsection 6(1)

30/06/1997

(1) Where a contract of insurance in relation to any class of insurance business (not being reinsurance business)is entered into by an insurer in contravention of section 6(1), the contract shall, at the option of the policy holder, beeither-

(a) enforceable against the insurer by the policy holder, and notwithstanding that contravention; or(b) void by reason of that contravention.

(2) A policy holder who in pursuance of subsection (1)(b) opts to void a contract of insurance before theexpiration of the contract shall be entitled to recover any consideration paid by him under the contract.

(3) Where a contract of insurance in relation to any class of insurance business (being reinsurance business) isentered into by an insurer in contravention of section 6(1), the contract shall not be void or voidable by reason only ofthat contravention.

(4) This section shall not apply to a contract of insurance entered into before the commencement of theInsurance Companies (Amendment) Ordinance 1990 (44 of 1990).

(Added 44 of 1990 s. 2)

Section: 7 Application for authorization to carry on insurancebusiness

30/06/1997

(1) Any company may make application in writing to the Insurance Authority for authorization to carry on anyclass of insurance business.

(2) The applicant shall furnish such information in such form as the Insurance Authority may require for thepurpose of determining the application together with the particulars specified in the Second Schedule relating to everydirector or controller of the applicant.

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Section: 8 Authorization 30/06/1997

(1) Upon application made by a company under section 7, the Insurance Authority-(a) subject to paragraph (b), may authorize the company in writing to carry on, subject to such conditions

as he may impose, any class or classes of insurance business; or(b) (i) shall refuse the application if subsection (2) or (3) applies; or

(ii) may refuse the application on any other ground whether or not the application has been refusedon a ground under subparagraph (i). (Replaced 41 of 1987 s. 2)

(2) The Insurance Authority shall not authorize a company under this section if it appears to the InsuranceAuthority that any person who is a director or controller of the company is not a fit and proper person to hold the

position held by him.(3) The Insurance Authority shall not authorize a company under this section unless the following conditions

are satisfied-(a) that, at the date of the application, the value of the assets of the company is not less than-

(i) in the case of a company carrying on or intending to carry on general business only, theaggregate of the amount of its liabilities and the relevant amount within the meaning of section10;

(ii) in the case of a company carrying on or intending to carry on long term business only, the greaterof the following-(A) the aggregate of the amount of its liabilities and the relevant amount within the meaning of

section 10; or(B) the aggregate of the amount of its liabilities and such amount as may be prescribed by or

determined in accordance with regulations made under section 59(1)(aa); (Amended 29 of1997 s. 3)

(iii) in the case of a company carrying on or intending to carry on both general business and longterm business, the aggregate of the amount which, if section 10(1) applied, would be the relevantamount in the case of the company having regard only to its general business and the greater ofthe following-(A) the aggregate of-

(I) the amount of its liabilities; and(II) if any part of the long term business carried on or intended to be carried on is of a

nature other than that specified in class G or H in Part 2 of the First Schedule,$2000000 or its equivalent; or

(B) the aggregate of the amount of its liabilities and such amount as may be prescribed by ordetermined in accordance with regulations made under section 59(1)(aa); and (Replaced 25of 1994 s. 4. Amended 29 of 1997 s. 3)

(b) that in the case of a company having a share capital, the aggregate of the amount paid up thereof andthe amount of any subordinated loan stock of the company and the amount paid up in respect of anyredeemable preference shares of the company is not less than-(i) except if subparagraph (ii), (iii) or (iv) applies to the company, $10000000 or its equivalent;


(ii) if the company intends to carry on both general business and long term business, or carries onboth general business and long term business outside Hong Kong, $20000000 or its equivalent;

(iii) if the company intends to carry on any class of insurance business (not being reinsurancebusiness) relating to liabilities or risks in respect of which persons are required by any Ordinanceto be insured, $20000000 or its equivalent; (Amended 35 of 1996 s. 4; 29 of 1997 s. 3)

(iv) if the company intends to carry on business as a captive insurer, $2000000 or its equivalent; and(Added 29 of 1997 s. 3)

(c) that as regards each class of risks against which, in the course of carrying on business, the companyproposes to insure persons-(i) adequate arrangements are in force, or will be made, for the reinsurance of risks of that class

against which persons are, or are to be, insured by the company in the course of carrying onbusiness; or

(ii) it is justifiable not to make arrangements for that purpose; and(d) that the company is, and will continue to be, able to meet its obligations including obligations in

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respect of business other than the class of insurance business in respect of which the application ismade; and

(e) in the case of a company to which Part XI of the Companies Ordinance (Cap 32) applies, that it hascomplied with the provisions of that Part; and

(f) that the company will be able to comply with such of the provisions of this Ordinance as would beapplicable to it; and

(g) that in the case of a company which carries on, or proposes to carry on, some other form of business inaddition to insurance business, the carrying on of that other form of business in addition to insurance

business is not contrary to the interest of existing and potential policy holders; and(h) that the name of the company is not likely to deceive.

(4) For the purposes of this Ordinance-(a) in computing the amount of the liabilities of a company or an insurer, as the case may be, all

contingent and prospective liabilities shall be taken into account but not liabilities in respect of thecompany's or insurer's share capital;

(b) subject to subsection (5), the value of any assets and the amount of any liabilities shall be determinedin accordance with any applicable regulations made under section 59(1)(a), and paragraph (a) shallhave effect subject to any such regulations; (Amended 29 of 1997 s. 3)

(c) if no such regulations are applicable in the case of a company or an insurer, as the case may be, regardshall be had-(i) in determining the value of its assets, to their market value and the cost of realizing such assets;

and(ii) in determining the amount of its liabilities, to the cost of the settlement of such liabilities and,

where the amount of any such abilities is assessed or estimated, to the experience of the companyor insurer in carrying on any relevant insurance business or of other persons carrying on the sameor similar insurance business. (Replaced 25 of 1994 s. 4)

(5) Subsection (4)(b) shall not apply in the case of a company carrying on or intending to carry on business as acaptive insurer. (Added 29 of 1997 s. 3)

Section: 9 Meaning of "controller" () in section 8(2) 30/06/1997(1) In section 8(2) "controller" (), in relation to a company ("the applicant" ()), means-

(a) a managing director of the applicant or of a body corporate of which it is a subsidiary;(b) a chief executive of the applicant or of a body corporate, being an insurer, of which it is a subsidiary;(c) a person-

(i) in accordance with whose directions or instructions the directors of the applicant or of a bodycorporate of which it is a subsidiary (or any of them) are accustomed to act; or

(ii) who, alone or with any associate or through a nominee, is entitled to exercise, or control theexercise of, 15% or more of the voting power at any general meeting of the applicant or of a

body corporate of which it is a subsidiary. (Amended 8 of 1989 s. 2)

(2) Subject to subsection (3), in this section "chief executive" (), in relation to the applicant or a

body corporate of which it is a subsidiary, means an employee of the applicant or that body corporate, who, alone orjointly with others, is responsible under the immediate authority of the directors for the conduct of the whole of theinsurance business of the applicant or that body corporate.

(3) In relation to an applicant incorporated outside Hong Kong-(a) the reference in subsection (1)(a) to a managing director of the applicant includes a reference to a

person who is a managing director of the applicant in respect of so much of its insurance business as iscarried on within Hong Kong; and

(b) the reference in subsection (1)(b) to a chief executive of the applicant includes a reference to a personemployed by the applicant who, alone or jointly with others, is responsible (whether or not under theimmediate authority of the directors) for the conduct of the whole of the insurance business carried on

by the applicant within Hong Kong, not being a person who-(i) is also responsible for the conduct of insurance business carried on by the applicant elsewhere;

and(ii) has a subordinate who is responsible for the whole of the insurance business carried on by the

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applicant within Hong Kong.

(4) In this section "associate" (), in relation to any person, means-

(a) the wife or husband or minor child of that person;(b) any body corporate of which that person is a director;(c) any person who is an employee or partner of that person;

(d) if that person is a body corporate-(i) any director of that body corporate;(ii) any subsidiary of that body corporate;(iii) any director or employee of any such subsidiary,

and for the purposes of this subsection "child" includes a step-child.

Section: 10 Meaning of "relevant amount" () in section 8(3) 30/06/1997(1) Subject to subsection (1A), the relevant amount in the case of a company carrying on or intending to carry

on general business only shall be the amount applicable to that company according to the following Table- (Amended25 of 1994 s. 5; 29 of 1997 s. 4)

TABLE

Case Amount Applicable

1. The relevant premium income of the company in itslast preceding financial year, or the relevant claimsoutstanding of the company as at the end of its last

preceding financial year, whichever is the greater, didnot exceed $50 million or its equivalent.

$10 million or its equivalent.

2. The said income in that year, or the said claimsoutstanding as at the end of that year, whichever isthe greater, exceeded $50 million but did not exceed$200 million or its equivalent.

One-fifth of the said income in that year, or one-fifth ofthe said claims outstanding at the end of that year, asthe case may be.

3. The said income in that year, or the said claimsoutstanding as at the end of that year, whichever isthe greater, exceeded $200 million; or its equivalent.

The aggregate of $40 million and-(a) one-tenth of the amount by which the said income

in that year exceeded $200 million; or(b) one-tenth of the amount by which the said claims

outstanding as at the end of that year exceeded$200 million,

as the case may be, or its equivalent.

In the case of a company referred to in section 8(3)(b)(iii), the amount applicable shall be not less than $20000000 orits equivalent. (Replaced 35 of 1996 s. 5)(1A) The relevant amount in the case of a company carrying on or intending to carry on business as a captive

insurer shall be the amount applicable to that company according to the following Table-

TABLE

Case Amount Applicable

1. The net premium income of the company in its lastpreceding financial year, or the net claimsoutstanding of the company as at the end of its last

preceding financial year, whichever is the greater, didnot exceed $40 million or its equivalent.

$2 million or its equivalent.

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2. The said income in that year, or the said claims

outstanding as at the end of that year, whichever isthe greater, exceeded $40 million or its equivalent.

5% of the said income in that year, or 5% of the saidclaims outstanding as at the end of that year, as thecase may be.

(Added 29 of 1997 s. 4)(2) The relevant amount in the case of a company carrying on or intending to carry on long term business only,

if any part of the long term business carried on or intended to be carried on is of a nature other than that specified inclass G or H in Part 2 of the First Schedule, is $2000000 or its equivalent. (Amended 25 of 1994 s. 5)

(3) The relevant amount in the case of a company carrying on or intending to carry on both general businessand long term business is the aggregate of the following amounts- (Amended 25 of 1994 s. 5)

(a) the amount which, if subsection (1) applied, would be the relevant amount in the case of that companyhaving regard only to its general business; and

(b) if any part of the long term business carried on or intended to be carried on is of a nature other thanthat specified in class G or H in Part 2 of the First Schedule, $2000000 or its equivalent. (Amended 59of 1993 s. 4)

(4) For the purposes of this section-

(a) in the case of a company whose last preceding financial year was not a period of 12 months, thepremium income in that financial year shall be deemed to be the sum obtained by dividing the amountof premiums receivable in that financial year by the number of days in that financial year andmultiplying the result by 365;

(b) the relevant premium income of a company in any financial year shall be whichever is the greater ofthe following amounts-(i) an amount equal to 50% of the gross premium income of the company in that financial year;(ii) the amount obtained by deducting from its gross premium income the amount of any premiums

payable by the company in respect of reinsurance;(ba) in the case of a company carrying on or intending to carry on business as a captive insurer, the net

premium income of such company in any financial year shall be the amount obtained by deductingfrom its gross premium income the amount of any premiums payable by the company in respect of

reinsurance; (Added 29 of 1997 s. 4)(bb) in the case of a company carrying on or intending to carry on business as a captive insurer, the net

claims outstanding of such company as at the end of a financial year shall be-(i) where no class of the general business of the company is accounted for on a fund accounting

basis, the aggregate of the following-(A) the amount of claims outstanding after deducting any amount recoverable from reinsurers

thereon; and(B) the additional amount for unexpired risks;

(ii) where all classes of the general business of the company are accounted for on a fund accountingbasis, the fund; or

(iii) where part of the general business of the company is accounted for on a fund accounting basis,the aggregate of the following-

(A) in respect of that part, the fund; and(B) in respect of the other part of that business-

(I) the amount of claims outstanding after deducting any amount recoverable fromreinsurers thereon; and

(II) the additional amount for unexpired risks; (Added 29 of 1997 s. 4)(c) the gross premium income of a company in any financial year shall the amount of premiums receivable

in that financial year in respect of all insurance business other than long term business;(d) the relevant claims outstanding of a company as at the end of a financial year shall be-

(i) where no class of the general business of the company is accounted for on a fund accountingbasis, the aggregate of the following-(A) an amount equal to 50% of the claims outstanding before deducting any amount

recoverable from reinsurers thereon, or the amount of claims outstanding after deductingany amount recoverable from reinsurers thereon, whichever is the greater; and

(B) the additional amount for unexpired risks;

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(ii) where all classes of the general business of the company are accounted for on a fund accountingbasis, the fund;

(iii) where part of the general business of the company is accounted for on a fund accounting basis,the aggregate of the following-(A) in respect of that part, the fund;(B) in respect of the other part of that business-

(I) an amount equal to 50% of the claims outstanding before deducting any amountrecoverable from reinsurers thereon, or the amount of claims outstanding afterdeducting any amount recoverable from reinsurers thereon, whichever is the greater;and

(II) the additional amount for unexpired risks; (Added 35 of 1996 s. 5)

(e) "additional amount for unexpired risks" (), "claims outstanding" (

) and "fund" () have the meanings respectively assigned to them in paragraph 1(1) of Part 1 of

the Third Schedule. (Added 35 of 1996 s. 5)

(5) In subsection (4)(a) and (c) "premiums receivable" (), in relation to a financial year, means the

premiums paid or payable to an insurer in respect of contracts written or renewed in that financial year beforededucting commissions of agents or brokers but after deducting any discounts specified in policies or refunds of

premiums made in respect of any termination or reduction of risks.

Section: 11 Appeal against refusal of authorization under section 8(2) 30/06/1997

(1) Where the Insurance Authority refuses to authorize a company under section 8 on the ground (or, if morethan one, on grounds which include the ground) that any person as mentioned in subsection (2) of that section is not afit and proper person to hold the position held by him, the Insurance Authority shall notify the company in writing ofthat fact and the name of the person whose fitness is in question.

(2) Where notice of a refusal is given to a company under subsection (1), a copy thereof shall at the same timebe sent by registered post to the person whose fitness is in question; and if the company or that person is aggrieved bysuch refusal the company or that person may, within 1 month from the date of the notice, appeal in writing against

such refusal so far as it is based on section 8(2) to the Financial Secretary, who shall review the Insurance Authority'sreasons for such refusal and whose decision shall be final; but his decision shall not affect such refusal so far as it isbased on any additional ground under section 8(1)(b). (Amended 41 of 1987 s. 3)

(3) Where the Insurance Authority refuses to authorize a company under section 8(1)(b)(ii), the InsuranceAuthority shall notify the company in writing of that refusal. (Added 41 of 1987 s. 3)

(4) Where notice of a refusal is given to a company under subsection (3) and the company is aggrieved by suchrefusal, it may, within 1 month from the date of the notice, appeal in writing against such refusal to the FinancialSecretary, who shall review the Insurance Authority's reasons for such refusal and whose decision shall be final; buthis decision shall not affect any refusal under section 8(1)(b)(i). (Added 41 of 1987 s. 3)

Section: 12 Conditions imposed under section 8 may be revoked 30/06/1997

(1) Where any authorization is granted subject to conditions imposed under section 8(1)(a), the InsuranceAuthority may revoke any such conditions by notice in writing given to the insurer concerned.

(2) Any condition referred to in subsection (1) which was in effect immediately before the commencement ofthe Insurance Companies (Amendment) Ordinance 1988 (34 of 1988) shall continue to have effect until it is revokedunder that subsection.

(3) Where any condition referred to in subsection (1) is revoked under that subsection, the Insurance Authoritymay direct that any matters recorded in respect of that condition in the register kept under section 5 shall be erased.

(Replaced 34 of 1988 s. 3)

Section: 13 Fee payable upon authorization and annually thereafter 30/06/1997

(1) Every authorized insurer shall pay the prescribed fees to the Insurance Authority-(a) not later than the date on which it is authorized; and(b) annually upon the anniversary of such date. (Replaced 50 of 1992 s. 2)

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(2) Subsection (1) shall apply to an insurer deemed by virtue of section 61(1) to be authorized under section 8to carry on insurance business as if-

(a) paragraph (a) were omitted; and(b) in paragraph (b), for "such date" there were substituted "the date on which it was first authorized to

carry on insurance business under any Ordinance repealed or amended by this Ordinance".(3) Where it appears to the Insurance Authority that an authorized insurer does not intend to effect any

contracts of insurance after any anniversary referred to in subsection (1), the Insurance Authority may waive thepayment of the fee payable by the insurer under that subsection in respect of that and any subsequent anniversary; butany such waiver may be revoked at any time by the Insurance Authority by notice in writing to the insurer, with effectfrom the date of such notice.

Section: 13A Approval of appointment by authorized insurer of certaincontrollers

30/06/1997

(1) In this section-

"controller" () , in relation to an authorized insurer-

(a) incorporated in Hong Kong, means a person who is a managing director or chief executive of the

insurer under section 9; and(b) incorporated outside Hong Kong, means a person who is-

(i) a managing director of the insurer by virtue of section 9(3)(a); or(ii) a chief executive of the insurer by virtue of section 9(3)(b); (Amended 59 of 1993 s. 5)

"notice of objection" () means a notice in writing objecting to the proposed appointment by an

authorized insurer of a person, specified in that notice, as a controller of the insurer.(2) Subject to section 38B(4), no authorized insurer shall appoint a person as a controller of the insurer unless-

(Amended 51 of 1992 s. 4)(a) the insurer has served on the Insurance Authority a notice in writing stating that it proposes to appoint

that person as such a controller and containing the information specified in the Fourth Schedule; and(b) one of the following occurs-

(i) the Insurance Authority has, before the expiration of 3 months from the date of service of thatnotice, notified the insurer in writing that there is no objection to that person being appointed assuch a controller;

(ii) the period referred to in subparagraph (i) has expired without the Insurance Authority havingserved on the insurer a preliminary notice referred to in subsection (5); or (Amended 35 of 1996s. 6)

(iii) where a preliminary notice referred to in subsection (5) is served on the insurer-(A) the Insurance Authority has, before the expiration of 2 months from the date of service of

the preliminary notice, notified the insurer in writing that there is no objection to theappointment; or

(B) the period referred to in sub-subparagraph (A) has expired without the Insurance Authorityhaving served on the insurer a notice of objection. (Added 35 of 1996 s. 6)

(3) No person appointed as a controller of an insurer in contravention of subsection (2) shall act or continue toact as such a controller.(4) A notice served by an insurer under subsection (2)(a) shall contain a statement signed by the person

proposed to be appointed as a controller that it is served with his knowledge and consent.(5) The Insurance Authority may serve a notice of objection on an insurer on the ground that it appears to him

that the person proposed to be appointed as a controller is not a fit and proper person to be so appointed, but beforeserving such a notice the Insurance Authority shall serve on the insurer and on that person a preliminary notice inwriting stating-

(a) that the Insurance Authority is considering the service on the insurer of a notice of objection on thatground; and

(b) that the insurer and that person may, within 1 month from the date of service of the preliminary notice,make representations in writing to the Insurance Authority and, if the insurer or that person so

requests, oral representations to a public officer appointed for the purpose by the Insurance Authority.(6) The Insurance Authority shall not be obliged to disclose to the insurer or to the person proposed to be

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appointed as a controller any particulars of the ground on which he is considering the service on the insurer of a noticeof objection.

(7) Where representations are made in accordance with subsection (5)(b), the Insurance Authority shall takethem into consideration before serving the notice of objection concerned.

(8) If the insurer or the person concerned is aggrieved by the decision of the Insurance Authority to serve anotice of objection on the insurer, the insurer or person concerned may, within 1 month from the date on which thenotice is served, appeal against the decision to the Financial Secretary whose decision shall be final.

(9) Any authorized insurer which fails to comply with subsection (2) commits an offence and is liable to a fineof $200000. (Amended 35 of 1996 s. 6)

(10) Any person who fails to comply with subsection (3) commits an offence and is liable to a fine of $200000and, in the case of an individual, to imprisonment for 2 years, together with a fine of $2000 for each day on which theoffence continues. (Amended 35 of 1996 s. 6)

(Added 44 of 1990 s. 3)

Section: 13B Approval of persons proposing to become certaincontrollers of authorized insurer

30/06/1997

(1) In this section-"controller" (), in relation to an authorized insurer, means a person who, alone or with any associate within the

meaning of section 9(4) or through a nominee, is entitled to exercise, or control the exercise of, 15% or more ofthe voting power at any general meeting of the insurer;

"notice of objection" () means a notice in writing objecting to the person specified in that notice

becoming a controller, or being a controller, as the case may be, of the authorized insurer specified in that notice.(2) No person shall become a controller of an authorized insurer incorporated in Hong Kong unless-

(a) he has served on the Insurance Authority a notice in writing stating that he proposes to become acontroller of that insurer and containing the information specified in the Fifth Schedule; and

(b) one of the following occurs-(i) the Insurance Authority has, before the expiration of 3 months from the date of service of that

notice, notified him in writing that there is no objection to his becoming a controller of theinsurer;

(ii) the period referred to in subparagraph (i) has expired without the Insurance Authority havingserved on him a preliminary notice referred to in subsection (4); or (Amended 35 of 1996 s. 7)

(iii) where a preliminary notice referred to in subsection (4) is served on the person-(A) the Insurance Authority has, before the expiration of 2 months from the date of service of

the preliminary notice, notified the person in writing that there is no objection to hisbecoming a controller of the insurer; or

(B) the period referred to in sub-subparagraph (A) has expired without the Insurance Authorityhaving served on him a notice of objection. (Added 35 of 1996 s. 7)

(3) Where a person-(a) becomes a controller of an insurer in contravention of subsection (2);

(b) did not know that the acts or circumstances by virtue of which he became such a controller were suchas to have that effect; and(c) subsequently becomes aware of the fact that he has become such a controller,

he shall serve on the Insurance Authority, not later than 14 days after becoming aware of that fact, a notice in writingstating that he has become such a controller and containing the information specified in the Sixth Schedule.

(4) The Insurance Authority may serve a notice of objection on a person on the ground that it appears to himthat the person is not a fit and proper person to become a controller, or to be a controller, as the case may be, of theinsurer concerned, but before serving such a notice the Insurance Authority shall serve on that person a preliminarynotice in writing stating-

(a) that the Insurance Authority is considering the service on him of a notice of objection on that ground;and

(b) that he may, within 1 month from the date of service of the preliminary notice, make written

representations to the Insurance Authority and, if he so requests, oral representations to a public officerappointed for the purpose by the Insurance Authority.

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(5) The Insurance Authority shall not be obliged to disclose to a person any particulars of the ground on whichhe is considering the service on him of a notice of objection.

(6) Where representations are made in accordance with subsection (4)(b), the Insurance Authority shall takethem into consideration before serving the notice of objection concerned.

(7) If a person is aggrieved by the decision of the Insurance Authority to serve a notice of objection on him, hemay, within 1 month from the date on which the notice is served, appeal against the decision to the Financial Secretarywhose decision shall be final.

(8) No transaction relating to the acquisition of voting power in an insurer shall be void or voidable by reasononly of a contravention of subsection (2).

(9) Subject to subsection (10), any person who fails to comply with subsection (2) commits an offence and isliable to a fine of $200000 and, in the case of an individual, to imprisonment for 2 years. (Amended 35 of 1996 s. 7)

(10) Where a person is charged with an offence under subsection (9), it shall be a defence to prove that he didnot know that the acts or circumstances by virtue of which he became a controller of the insurer concerned were suchas to have that effect.

(11) Any person who fails to comply with subsection (3) commits an offence and is liable to a fine of $200000and, in the case of an individual, to imprisonment for 2 years, together with a fine of $2000 for each day on which theoffence continues. (Amended 35 of 1996 s. 7)

(Added 44 of 1990 s. 3)

Section: 13C Restrictions on and sale of shares where there has been acontravention of section 13B(2)

25 of 1998 01/07/1997


(1) The powers conferred by this section shall be exercisable where a person has become a controller of aninsurer in contravention of section 13B(2) in that-

(a) a notice in writing has been served under section 13B(2)(a) on the Insurance Authority by that personin respect of that insurer but none of the events specified in section 13B(2)(b) has occurred; (Amended

35 of 1996 s. 8)(b) no notice in writing has been served under section 13B(3) on the Insurance Authority by that person in

respect of that contravention;(c) a notice in writing has been served under section 13B(3) on the Insurance Authority by that person in

respect of that contravention, the Insurance Authority has served a notice of objection under section13B(4) on that person in respect of that contravention, and either-(i) the period specified in section 13B(7) within which that person may appeal against the decision

of the Insurance Authority to so serve such notice of objection has expired without any suchappeal having been made; or

(ii) an appeal under section 13B(7) by that person against the decision of the Insurance Authority toso serve such notice of objection is unsuccessful; or

(d) that person has been convicted of an offence under section 13B(9) in respect of that contravention.

(2) Subject to subsection (6), the Insurance Authority may by notice in writing served on the person concerneddirect that any specified shares to which this section applies shall, until further notice, be subject to one or more of thefollowing restrictions-

(a) any transfer of those shares or, in the case of unissued shares, any transfer of the right to be issued withthem, and any issue of such shares, shall be void;

(b) no voting rights shall be exercisable in respect of the shares;(c) no further shares shall be issued in right of them or in pursuance of any offer made to their holder;(d) except in a liquidation, no payment shall be made of any sums due from the insurer on the shares,

whether in respect of capital or otherwise.(3) Where shares are subject to the restrictions under subsection (2)(a), any agreement to transfer the shares or,

in the case of unissued shares, the right to be issued with them, shall be void.(4) Where shares are subject to the restrictions under subsection (2)(c) or (d), an agreement to transfer any right

to be issued with other shares in right of those shares, or to receive any payment on them (otherwise than in aliquidation) shall be void.

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(5) Subject to subsection (7), the Court of First Instance may, on the application of the Insurance Authority,order the sale of any specified shares to which this section applies and, if they are for the time being subject to anyrestrictions under subsection (2), that they shall cease to be subject to those restrictions. (Amended 25 of 1998 s. 2)

(6) Where the Insurance Authority has, by virtue of subsection (1)(b), served a notice in writing undersubsection (2) on the person concerned and-

(a) that person has, not later than 14 days after the service of that notice, served a notice in writing undersection 13B(3) on the Insurance Authority in respect of the contravention of section 13B(2) to whichthat first-mentioned notice relates; and

(b) one of the following occurs-(i) the Insurance Authority has, before the expiration of 3 months from the date on which that notice

under section 13B(3) has been served on him, notified that person in writing that there is noobjection to his having become the controller, within the meaning of section 13B, to which thatcontravention relates;

(ii) no preliminary notice of objection under section 13B(4) has been served by the InsuranceAuthority on that person in respect of that contravention within 3 months from the date on whichthe notice under section 13B(3) has been served on the Insurance Authority;

(iii) where a preliminary notice of objection under section 13B(4) has been served on the person in

respect of that contravention-(A) the Insurance Authority has, before the expiration of 2 months from the date of service ofthe preliminary notice, notified that person in writing that there is no objection to hishaving become the controller, within the meaning of section 13B, to which thatcontravention relates; or

(B) the period referred to in sub-subparagraph (A) has expired without the Insurance Authorityhaving served on that person a notice of objection under section 13B(4) in respect of thatcontravention; or

(iv) a notice of objection has been so served within the period referred to in subparagraph (iii)(A) butan appeal under section 13B(7) by that person against the decision of the Insurance Authority toso serve such notice of objection is successful, (Replaced 35 of 1996 s. 8)

the Insurance Authority shall forthwith serve a notice in writing on that person to the effect that the first-mentioned

notice is revoked.(7) The Insurance Authority shall not, by virtue of subsection (1)(b), make an application referred to in

subsection (5) unless-(a) the application relates to shares which are the subject of a notice in writing under subsection (2); and(b) the person upon whom that notice has been served has not, within 14 days after the service of that

notice, served a notice in writing under section 13B(3) in respect of the contravention of section13B(2) to which that first-mentioned notice relates:

Provided that this subsection shall be without prejudice to the Insurance Authority's power, by virtue ofsubjection (1)(c), to subsequently make such an application in respect of those shares.

(8) Where an order has been made under subsection (5) the Court of First Instance may, on the application ofthe Insurance Authority, make such further order relating to the sale or transfer of the shares as it thinks fit. (Amended25 of 1998 s. 2)

(9) Where shares are sold in pursuance of an order under this section the proceeds of the sale, less the costs ofthe sale, shall be paid into court for the benefit of the persons beneficially interested in them, and any such person mayapply to the Court of First Instance for an order that the whole or part of the proceeds to be paid to him. (Amended 25of 1998 s. 2)

(10) This section applies to all the shares by virtue of which a person who has become a controller of an insurerin contravention of section 13B(2) is, whether alone or with any associate within the meaning of section 9(4) orthrough a nominee, entitled to exercise, or control the exercise of, the voting power at any general meeting of theinsurer, but does not include any such shares held by that person, or any such associate or nominee, before that person

became such a controller.(11) A copy of a notice in writing served under subsection (2) or (6) on the person concerned shall be served on

the insurer to whose shares it relates and, if it relates to shares held by an associate within the meaning of section 9(4),or a nominee, of that person, on that associate or nominee, as the case may be.

(Added 44 of 1990 s. 3)

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Section: 13D Punishment for attempted evasion of restrictions 30/06/1997

(1) A person commits an offence and is liable to a fine at level 4 and to imprisonment for 6 months if he-(a) exercises or purports to exercise any right to dispose of any shares which, to his knowledge, are for the

time being subject to any restrictions under section 13C(2) or of any right to be issued with any suchshares;

(b) votes in respect of any such shares (whether as holder or proxy), or appoints a proxy to vote in respectof them;

(c) being the holder of any such shares, fails to notify of their being subject to those restrictions anyperson whom he does not know to be aware of that fact but does know to be entitled (apart from therestrictions) to vote in respect of those shares whether as holder or as proxy; or

(d) being the holder of any such shares, or being entitled to any right to be issued with other shares in rightof them, or to receive any payment on them (otherwise than in a liquidation), enters into any agreementwhich is void under section 13C(3) or (4).

(2) Where shares in an insurer are issued in contravention of restrictions under section 13C(2), or payments aremade by an insurer in contravention of such restrictions, the insurer commits an offence and is liable to a fine at level4 and, in the case of an individual who commits the like offence by virtue of section 57, to imprisonment for 6 months.

(Added 44 of 1990 s. 3. Amended 35 of 1996 s. 9)

Section: 14 Notification of change in particulars, and objection toappointment of new director or controller

30/06/1997

(1) Without prejudice to subsection (2), but subject to sections 38A(2) and 38B(5), where any change takesplace in the particulars specified in respect of an authorized insurer in the application made by that insurer undersection 7 or any information furnished under that section, the insurer shall, within 1 month from the date on which thechange takes place, notify the Insurance Authority thereof in writing and shall furnish the Insurance Authority withsuch information in respect thereof as the Insurance Authority may require. (Amended 51 of 1992 s. 5)

(2) Subject to subsection (2A) and sections 38A(2) and 38B(5), where any change takes place in the directorsor controllers of an authorized insurer, the insurer shall forthwith deliver written notice of that fact to the Insurance

Authority containing the information specified in the Second Schedule. (Amended 44 of 1990 s. 4; 51 of 1992 s. 5)(2A) Without limiting the generality of subsection (3), an authorized insurer is not required to furnish to the

Insurance Authority information referred to in Form A or B of the Second Schedule in respect of any change in thecontrollers of the insurer which is the result of a person becoming, or being, such a controller where-

(a) section 13A or 13B applied in relation to that person becoming, or being, such a controller;(b) that person has become, or is, such a controller in accordance with section 13A or 13B; and(c) there has been no change in any information furnished to the Insurance Authority under section 13A or

13B in relation to that person becoming, or being, such a controller. (Added 44 of 1990 s. 4)(3) Subject to sections 38A(2) and 38B(5), where any person becomes or ceases to be a director or controller of

any authorized insurer, he shall forthwith deliver written notice of that fact to the insurer together with suchinformation relating to himself as may be necessary to enable the insurer to comply with subsection (2) as respects thatfact. (Amended 51 of 1992 s. 5)

(4) Subject to subsection (5) and section 38B(4), the Insurance Authority may, if it appears to him that anyperson appointed as director or controller (other than a controller to whom section 13A or 13B applies) of anauthorized insurer is not a fit and proper person to be appointed to that position, serve a notice in writing on the insurerstating- (Amended 44 of 1990 s. 4; 51 of 1992 s. 5)

(a) that he objects to the appointment; and(b) that he objects thereto on the ground that it appears to him that the person so appointed is not a fit and

proper person to be appointed to the position in question.(5) The following provisions shall apply in relation to a notice of objection referred to in subsection (4)-

(a) the Insurance Authority shall serve on the insurer and the person concerned a preliminary writtennotice stating-(i) that the Insurance Authority is considering the service on the insurer of a notice of objection

under that subsection on the ground referred to in paragraph (b) thereof;(ii) that the insurer and that person may, within 1 month from the date of service of the preliminarynotice, make written representations to the Insurance Authority and, if the insurer or that person

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so requests, oral representations to a public officer appointed for the purpose by the InsuranceAuthority; (Amended 44 of 1990 s. 4)

(b) the Insurance Authority shall not be obliged to disclose to the insurer or to that person any particularsof the ground on which he is considering the service on the insurer of the notice of objection;

(c) where representations are made under paragraph (a)(ii), the Insurance Authority shall take them intoconsideration before serving the notice of objection.

(6) If the insurer or the person concerned is aggrieved by the decision of the Insurance Authority to serve anotice of objection under this section, the insurer or person concerned may, within 1 month from the date on which thenotice is served on the insurer or person concerned as the case may be, appeal against the decision to the FinancialSecretary whose decision shall be final.

(7) (Repealed 50 of 1992 s. 3)(8) Any person who fails to comply with subsection (1), (2) or (3) commits an offence and is liable to a fine of

$200000 and, in the case of an individual, to imprisonment for 2 years, together with a fine of $2000 for each day onwhich the offence continues. (Amended 35 of 1996 s. 10)

Part: III ACCOUNTS AND STATEMENTS 30/06/1997

Section: 15 Appointment of auditor and actuary 30/06/1997

(1) Every insurer shall appoint-(a) as auditor of the insurer-

(i) a person who is qualified for appointment as auditor of a company under the ProfessionalAccountants Ordinance (Cap 50) and is not disqualified under section 140 of the CompaniesOrdinance (Cap 32); or

(ii) in the case of an insurer incorporated outside Hong Kong, a person-(A) who may lawfully practise as an auditor in the place of its incorporation; and(B) without prejudice to sub-subparagraph (A), who holds such qualification as the Insurance

Authority accepts as being of a standard comparable to that of a person referred to in

subparagraph (i); and (Replaced 59 of 1993 s. 6)(iii) (Repealed 59 of 1993 s. 6)

(b) if the insurer carries on long term business, an actuary possessing the prescribed qualifications or whois acceptable to the Insurance Authority, as actuary to the insurer,

and whenever any such appointment comes to an end the insurer shall as soon as practicable make a freshappointment.

(2) A first appointment made-(a) under subsection (1)(a) shall be made-

(i) if the insurer is carrying on insurance business at the commencement of this Ordinance, within 1month from such commencement; or

(ii) if the insurer begins to carry on insurance business after such commencement, within 1 monthfrom beginning to do so; and

(b) under subsection (1)(b) shall be made-(i) if the insurer is carrying on long term business at the commencement of this Ordinance, within 1

month from such commencement;(ii) if the insurer begins to carry on long term business after such commencement, within 1 month

from beginning to do so.(3) An insurer making an appointment under subsection (1) shall within 1 month from making the appointment

serve on the Insurance Authority a notice in writing stating that fact and the name and qualifications of the personappointed.

(4) (Repealed 59 of 1993 s. 6)(5) Any insurer which fails to comply with any of the provisions of this section commits an offence and is

liable to a fine at level 4, together with a further fine of $1000 for each day on which the offence continues.

(Amended 59 of 1993 s. 6; 35 of 1996 s. 11)

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Section: 15A Notification in respect of auditors appointed under section15

30/06/1997

(1) An insurer shall immediately give written notice to the Insurance Authority if-(a) the insurer decides to remove or replace an auditor appointed under section 15;(b) a person appointed under section 15 to be the auditor of the insurer ceases to be such auditor otherwise

than in consequence of a decision referred to in paragraph (a); or(c) in relation to an insurer incorporated in Hong Kong-

(i) the insurer either-(A) proposes to give special notice to its shareholders of a resolution removing an auditor

appointed under section 131 of the Companies Ordinance (Cap 32) before the expiration ofhis term of office; or

(B) gives notice to its shareholders of a resolution replacing an auditor so appointed at theexpiration of his term of office; and

(ii) the auditor so appointed has also been appointed under section 15 to be the auditor of the insurer.(2) An auditor appointed under section 15 and, in the case of paragraph (c), an auditor appointed under

paragraph 4(1A) of Part 1 of the Third Schedule, by an insurer shall immediately give written notice to the Insurance

Authority if he- (Amended 26 of 1994 s. 3)(a) resigns;(b) where he has been so appointed for a fixed term, decides not to seek reappointment; or(c) decides to add a qualification or adverse statement to his report annexed to the accounts and statements

of the insurer required to be submitted under the Third Schedule. (Amended 26 of 1994 s. 3)(3) Any insurer which fails to comply with subsection (1) commits an offence and is liable to a fine at level 4,

together with a further fine of $1000 for each day on which the offence continues. (Amended 35 of 1996 s. 12)(4) Where a person is charged with an offence under subsection (3), it shall be a defence if the person charged

proves that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence.(Added 59 of 1993 s. 7)

Section: 15B Notification in respect of actuaries appointed under section

15

30/06/1997

(1) An insurer which carries on long term business shall immediately give written notice to the InsuranceAuthority if-

(a) the insurer decides to remove or replace an actuary appointed under section 15; or(b) a person appointed under section 15 to be the actuary of the insurer ceases to be such actuary otherwise

than in consequence of a decision referred to in paragraph (a).(2) An actuary appointed under section 15 by an insurer shall immediately give written notice to the Insurance

Authority-(a) if he resigns;(b) where he has been so appointed for a fixed term, decides not to seek reappointment; or(c) if-

(i) he has advised the insurer that, in his view, a course of action is being, or is proposed to be,followed by the insurer which is likely to cause him to add a qualification or adverseamplification or adverse explanation to his certificate accompanying the information required to

be submitted under the Third Schedule in respect of the long term business of the insurer; and(ii) after the insurer has had, in the opinion of the actuary, a reasonable time within which to act on

that advice, that course of action is still being, or is still proposed to be, followed by the insurer.(3) Any insurer which fails to comply with subsection (1) commits an offence and is liable to a fine at level 4,

together with a fine of $1000 for each day on which the offence continues. (Amended 35 of 1996 s. 13)(4) Where a person is charged with an offence under subsection (3), it shall be a defence if the person charged

proves that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence.(Added 59 of 1993 s. 7)

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Section: 15C Standards to be complied with by an actuary 31 of 2000 02/06/2000

An actuary appointed under section 15(1)(b) shall comply with the prescribed standards or other standards as theInsurance Authority accepts as being comparable to the prescribed standards.

(Added 31 of 2000 s. 2)

Section: 16 Keeping and preserving of proper books of account 30/06/1997

(1) Without prejudice to the Companies Ordinance (Cap 32), every insurer shall cause to be kept proper booksof account which may be kept either in a legible form or in a non-legible form capable of being reproduced in a legibleform; but where any such books are kept otherwise than by making entries in a bound book, adequate precautionsshall be taken for guarding against falsification and facilitating its discovery.

(2) Proper books of account, for the purposes of this section, are books of account which (in themselves or, ifkept under subsection (1) otherwise than in a legible form, as reproduced in a legible form) sufficiently exhibit andexplain all transactions entered into by the insurer in the course of any business carried on by the insurer.

(3) If any books of account required to be kept by this section are kept by an insurer by recording the matters inquestion otherwise than in a legible form, any power conferred by this Ordinance to require production of such books

or to take copies thereof or extracts therefrom shall be construed as including power to require production of, and totake away, a reproduction of the recording or of the relevant part of it in a legible form.

(4) Any books of account required to be kept by this section shall be preserved by the insurer for 7 years fromthe end of the financial year to which the last entry made or matter recorded therein relates.

Section: 17 Submission of financial information 30/06/1997

(1) Every insurer shall, in accordance with section 20, submit to the Insurance Authority accounts, statementsand other information as required by the Third Schedule, and the information so submitted shall be in accordance withsection 8(4). (Amended 25 of 1994 s. 6)

(2) The Insurance Authority may, at the request in writing of an insurer, modify or vary any of the requirementsof the Third Schedule in relation to that insurer in such respects and for such period as the Insurance Authority and the

insurer may agree; and during any period when any such modification or variation is in force, the reference insubsection (1) to the Third Schedule shall, as respects that insurer, be construed as a reference to that Schedule as somodified or varied.

(3) Where under subsection (2) the Insurance Authority modifies or varies any of the requirements of the ThirdSchedule in relation to an insurer, he shall, as soon as practicable, publish a notice in the Gazette stating the name ofthe insurer and the fact that that Schedule has been modified or varied under subsection (2) in relation to that insurer.

Section: 18 Periodic actuarial investigation of insurer with long termbusiness

30/06/1997

(1) Any insurer which carries on long term business-

(a) shall, once in every 12 months or at such shorter intervals as the Insurance Authority may require,cause an investigation to be made into its financial condition in respect of that business including avaluation of its liabilities in respect thereof, by the person who for the time being is its actuary undersection 15(1); and (Amended 8 of 1989 s. 4)

(b) when such an investigation has been made, or when at any other time an investigation into thefinancial condition of the insurer in respect of its long term business has been made with a view to thedistribution of profits, or the results of which are made public, shall cause an abstract of the actuary'sreport of the investigation to be made in the form specified in the Third Schedule and shall submit suchabstract to the Insurance Authority in accordance with section 20.

(2) Where under subsection (1) an insurer causes an abstract to be made of the report of an actuary on hisinvestigation into the financial condition of the insurer in respect of its long term business, the insurer shall prepare astatement containing the information specified in the Third Schedule in respect of its long term business at the date to

which the accounts of the insurer are made up for the purposes of the investigation and shall submit such statement tothe Insurance Authority in accordance with section 20.

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(3) For the purposes of any investigation to which this section applies the value of any assets and the amount ofany liabilities shall be determined in accordance with section 8(4). (Amended 25 of 1994 s. 7)

Section: 19 Statements of transactions of prescribed class ordescription

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(1) Classes or descriptions of agreements or arrangements appearing to the Insurance Authority as likely to beundesirable in the interests of policy holders may be prescribed for the purposes of this section, and every insurerwhich enters into an agreement or arrangement of a class or description so prescribed shall, within such period as may

be prescribed, furnish the Insurance Authority with a statement containing such particulars of that agreement orarrangement as may be prescribed. (Amended 25 of 1994 s. 8)

(2) Different classes or descriptions of agreements or arrangements may be prescribed for the purposes of thissection in relation to insurers of different classes or descriptions.

(3) The whole or any part of any statement furnished to the Insurance Authority under this section may bedeposited by him with the Registrar of Companies and may be published by the Insurance Authority in such ways ashe thinks appropriate.

Section: 20 Deposit of accounts etc. with Insurance Authority 51 of 1999 23/07/1999

(1) Subject to subsection (1A), any account, balance sheet, abstract, certificate or statement of an insurer andany report of the auditor thereof required to be submitted to the Insurance Authority under section 17 or 18 shall be inlegible form, and 2 copies shall be deposited with the Insurance Authority within 6 months after the close of the periodto which the account, balance sheet, abstract, certificate, statement or report relates: (Amended 51 of 1999 s. 2)

Provided that if in any case it is made to appear to the Insurance Authority that the circumstances are such that alonger period than 6 months should be allowed, the Insurance Authority may extend that period by such period notexceeding 3 months as he thinks fit.

(1A) Information required to be submitted under section 17 that is specified in Parts 8 and 9 of the ThirdSchedule shall be submitted in accordance with subsection (1), except that the references in that subsection to 6months shall be read as 4 months. (Added 51 of 1999 s. 2)

(2) One of the copies of any document deposited under subsection (1) except an auditor's report shall be a copysigned-

(a) in any case-(i) where there are more than 2 directors of the insurer, by at least 2 of those directors and, where

there are not more than 2 directors, by all the directors;(ii) by a chief executive, if any, of the insurer or (if there is no chief executive) by the secretary; and

(b) in the case of an abstract or statement referred to in section 18, by the actuary who made theinvestigation to which the abstract relates or by reference to which the statement was prepared.

(3) One of the copies of any auditor's report deposited under subsection (1) shall be a copy signed by theauditor.

(4) The Insurance Authority shall consider the documents deposited under subsection (1), and if any suchdocument appears to him to be inaccurate or incomplete in any respect he may communicate with the insurer with aview to the correction of any such inaccuracies and the supply of deficiencies.

(5) There shall be deposited with every balance sheet of an insurer any report on the affairs of the insurersubmitted to the shareholders or policy holders of the insurer in respect of the financial year to which the balance sheetrelates.

(6) In this section any reference to an account or balance sheet includes a reference to any statement or reportannexed thereto giving information required by virtue of section 17 to be so given and any certificate so annexed byvirtue of that section.

(7) Any insurer which fails to comply with any of the provisions of this section commits an offence and isliable to a fine of $200000 together with a fine of $1000 for each day on which the offence continues. (Amended 35of 1996 s. 14)

Section: 21 Documents to be deposited with Registrar of Companies 30/06/1997

(1) Without prejudice to the Companies Ordinance (Cap 32), where an insurer which is a company submits to

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the Insurance Authority any account, balance sheet, abstract, certificate or statement of the insurer or any report of theauditor thereof required to be submitted under section 17 or 18, the insurer shall at the same time deposit a copy ofsuch document, except any such document required to be submitted by Part 8 or 9 of the Third Schedule, with theRegistrar of Companies. (Amended 50 of 1992 s. 4; 26 of 1994 s. 4)

(2) Any insurer which fails to comply with subsection (1) commits an offence and is liable to a fine of$200000. (Amended 35 of 1996 s. 15)

Part: IV LONG TERM BUSINESS 30/06/1997

Section: 22 Separation of assets and liabilities attributable to longterm business

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(1) Where an insurer carries on long term business, the insurer shall-(a) maintain an account in respect of each of the following-

(i) that part of that business (if any) which consists of business other than business referred to insubparagraphs (ii) and (iii); (Replaced 75 of 1995 s. 4)

(ii) that part of that business carried on in or from Hong Kong (if any) which is of the naturespecified in class G in Part 2 of the First Schedule; and (Amended 75 of 1995 s. 4)

(iii) that part of that business carried on in or from Hong Kong (if any) which is of the naturespecified in class H in Part 2 of the First Schedule; and (Amended 75 of 1995 s. 4)

(b) ensure that the receipts of that part of that business for which an account is maintained in pursuance ofparagraph (a) are-(i) entered in that account; and(ii) carried to and form a separate insurance fund with an appropriate name. (Replaced 59 of 1993 s.

8)(1A) Where an insurer which carries on long term business is incorporated or formed outside Hong Kong, the

Insurance Authority may, at the request in writing of the insurer, authorize the insurer to maintain accounts of otherinsurance business closely related to long term business or part thereof as part of the account maintained pursuant to

subsection (1)(a)(i). (Added 75 of 1995 s. 4)(2) An insurer which carries on long term business shall maintain such books of account and other records as

are necessary for identifying-(a) the assets representing each fund maintained by the insurer in respect of that business; and(b) the liabilities attributable to that part of that business to which each fund referred to in paragraph (a)

relates. (Replaced 59 of 1993 s. 8)(3) Any funds maintained by an insurer in respect of its long term business shall be so maintained that-

(a) in the case of a fund maintained in respect of that part of that business carried on in or from HongKong which is of the nature specified in either class G or H in Part 2 of the First Schedule, the value ofthe assets representing the fund (as determined in accordance with section 8 (4)) is in the aggregate notless than the amount of the liabilities attributable to that part of that business (as so determined);(Amended 25 of 1994 s. 9; 75 of 1995 s. 4)

(b) in the case of any other funds, the value of the assets representing those funds (as determined inaccordance with section 8(4))in the aggregate is not less than the greater of the following-(i) the aggregate of-

(A) the amount of the liabilities attributable to those parts of that business to which the fundsrelate (as so determined); and

(B) $2000000 or its equivalent; or(ii) the aggregate of the amount of the liabilities attributable to those parts of that business to which

the funds relate (as so determined) and such amount as may be required to be held in such fundsin accordance with regulations made under section 59(1)(ab). (Replaced 59 of 1993 s. 8.Amended 25 of 1994 s. 9; 29 of 1997 s. 5)

(4) (Repealed 59 of 1993 s. 8)

(5) Any insurer which fails to comply with any of the provisions of this section commits an offence and isliable to a fine of $200000 together with a fine of $1000 for each day on which the offence continues. (Amended 35of 1996 s. 16)

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Section: 22A Foreign insurers may be authorized to maintain accountsin relation to their Hong Kong business

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(1) Where an insurer which carries on long term business is incorporated or formed outside Hong Kong, theInsurance Authority may, at the request in writing of the insurer, authorize the insurer to maintain accounts of longterm business carried on in or from Hong Kong in place of the accounts referred to in section 22(1) and, if such anauthorization is given, the insurer shall maintain accounts of long term business carried on in or from Hong Kong inaccordance with that authorization.

(2) The Insurance Authority may, in giving his authorization under subsection (1)-(a) modify or vary any of the requirements of the Third Schedule in its application to the insurer as may be

appropriate; and(b) specify the period within which the insurer shall, in accordance with the Third Schedule as modified or

varied under paragraph (a), make arrangements for identifying the assets and liabilities of the insurerwhich are attributable to its long term business carried on in or from Hong Kong as on such day asmay be so specified. (Amended 75 of 1995 s. 5)

(3) Subject to the terms of any authorization under subsection (1) and to subsection (4), this Ordinance shall

continue to apply to an insurer in respect of whom such authorization is in force.(4) Where an authorization under subsection (1) is in force in relation to any insurer, any references in-(a) sections 22(1)(a) and (b), (2)(a) and (b) and (3), 23 and 45(2), (4A), (4B) and (5) to the long term

business of the insurer, or to the business of the insurer where this is to be construed as a reference toits long term business, shall be construed as a reference to the long term business of the insurer carriedon in or from Hong Kong; (Amended 75 of 1995 s. 5)

(b) sections 22, 23 and 45 to a fund maintained by the insurer in respect of its long term business, shall beconstrued as a reference to a fund maintained by the insurer in respect of its long term business carriedon in or from Hong Kong. (Amended 75 of 1995 s. 5)

(5) Where the Insurance Authority gives any authorization under subsection (1) he shall, as soon as practicable,publish a notice in the Gazette stating the name of the insurer and the fact that such authorization has been given.

(Added 4 of 1987 s. 2. Amended 59 of 1993 s. 9)

Section: 23 Application of assets of insurer with long term business 30/06/1997

(1) Subject to subsections (2) and (3) and section 45(2), the assets representing a fund maintained by an insurerin respect of its long term business shall be applicable only for the purposes of that part of that business to which thefund relates. (Amended 59 of 1993 s. 10)

(2) Where in respect of an insurer's long term business it is shown, by an investigation to which section 18applies or which is made in pursuance of a requirement under section 32-

(a) in the case of a fund maintained in respect of that part of that business which is of the nature specifiedin either class G or H in Part 2 of the First Schedule, that the value of the assets representing the fundexceeds the amount of the liabilities attributable to that part of that business; or

(b) in the case of any other funds, that the value of the assets representing the funds exceeds the greater ofthe following-(i) the aggregate of-

(A) the amount of the liabilities attributable to those parts of that business to which the fundsrelate; and

(B) $2000000 or its equivalent; or(ii) the aggregate of the amount of the liabilities so attributable and such amount as may be required

to be held in such funds in accordance with regulations made under section 59(1)(ab), (Amended25 of 1994 s. 10; 29 of 1997 s. 6)

the restriction imposed by subsection (1) shall not apply to so much of those assets as represents the excess.(Replaced 59 of 1993 s. 10)

(3) Nothing in subsection (1) shall preclude an insurer from exchanging, at fair market value, assets

representing a fund maintained by the insurer in respect of its long term business for other assets of the insurer.(4) Any mortgage or charge shall be void to the extent to which it contravenes subsection (1).(5) For the avoidance of doubt it is hereby declared that money from a fund maintained by an insurer in respect

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of its long term business may not be used for the purposes of any other business of the insurer (including any longterm business to which that fund does not relate) notwithstanding any arrangement for its subsequent repayment out ofthe receipts of that other business. (Amended 59 of 1993 s. 10)

(6) No insurer, and no body corporate of which an insurer is a subsidiary, shall declare a dividend toshareholders at any time when the requirements of section 22(3) relating to any fund or funds maintained by theinsurer in respect of its long term business have ceased to be satisfied.

(7) Any insurer or body corporate which fails to comply with subsection (1) or (6) commits an offence and isliable to a fine of $200000 together with a fine of $1000 for each day on which the offence continues. (Amended 35of 1996 s. 17)

Section: 24 Sanction of Court of First Instance for transfer of longterm business

L.N. 362 of 1997;25 of 1998

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(1) Where it is proposed to carry out a scheme under which the whole or part of the long term business carried

on in Hong Kong by an insurer ("the transferor company") is to be transferred to another insurer ("the transfereecompany") the transferor company or transferee company may apply to the Court of First Instance, by petition, for anorder sanctioning the scheme.

(2) The Court of First Instance shall not determine an application under this section unless the petition isaccompanied by a report on the terms of the scheme by an independent actuary and the Court of First Instance issatisfied that the requirements of subsection (3) have been complied with.

(3) The requirements referred to in subsection (2) are-(a) that a notice has been published in the Gazette and, except where the Court of First Instance has

otherwise directed, in an English language newspaper and a Chinese language newspaper (being ineach case a newspaper specified in a list of newspapers approved by the Chief Secretary forAdministration for the purposes of this section) stating that the application has been made and givingthe address of the offices at which, and the period for which, copies of the documents mentioned in

paragraph (d) will be available as required by that paragraph; (Amended 34 of 1988 s. 4; 44 of 1990 s.5; L.N. 362 of 1997)

(b) except where the Court of First Instance has otherwise directed, that a statement-(i) setting out the terms of the scheme; and(ii) containing a summary of the report mentioned in subsection (2) sufficient to indicate the opinion

of the actuary on the likely effects of the scheme on the long term policy holders of the insurersconcerned,

has been sent to each of those policy holders and to every member of those insurers;(c) that a copy of the petition, of the report mentioned in subsection (2) and of any statement sent out

under pa