The Office of the Commissioner of Insurance, a department of the government of Hong Kong also known informally as the Insurance Authority, is preparing requests for proposals from management consultants to review its structure, says Ros Lam Ka-tai, associate commissioner. A consultant will likely be appointed by the end of the year.
The consultant's role will be to first, evaluate whether the IA should remain within the civil service or be spun off as a statutory body; and second, if spun off, should it be merged with other regulatory entities. By its legacy of being one of Hong Kong's oldest financial regulators, IA which was founded in 1990, is the only one that is a government department. Latecomers such as the Hong Kong Monetary Authority (established in 1993) and the Mandatory Provident Fund Schemes Authority (established in 2000) were set up as statutory bodies.
The review was prompted in part by the recent creation of MPFA, which took over IA's role of regulating the Occupational Retirement Schemes Ordinance (ORSO), the framework for corporations' private retirement plans. Adding to the need to review IA's structure is market-driven blurring between financial services. The growing popularity of bancassuance means insurance companies are falling under HKMA's remit of regulating banking activity, while the growth of investment-linked insurance products is putting them under the Securities and Futures Commission's eye.
Market players say MPFA is exploring a merger with IA because its biggest job launching the Mandatory Provident Fund project is over, reducing it to a mere supervisory role. IA's previous ORSO role makes sense in this context. They also note that due to the convergence among financial institutions, some SFC executives would like to bring both MPFA and IA under its remit.
Lam says the goals of making IA more independent include a clearer identity, more flexibility in recruiting and retaining employees, and enhanced accountability. It is the consultant's job to determine whether independence will actually lead to such results. Lam says IA executives themselves are agnostics on the issue.
IA's job is to prudently supervise the insurance industry, ensure its stability and protect insurance policyholders.