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Clifford Chance

Clifford Chance

Regulatory Investigations and Financial Crime Insights

Raising the bar: New Fit and Proper and CPD Guidelines published for insurance intermediaries in Hong Kong

In preparation for the new regulatory regime for insurance intermediaries in Hong Kong, the Insurance Authority has published two new guidelines on Fit and Proper Criteria and Continuing Professional Development to come into effect on 23 September 2019.

On 31 July 2019, the Insurance Authority (IA) published in final form two new guidelines in the conclusions to its September 2018 public consultation (consultation conclusions), namely Guideline on Fit and Proper Criteria for Licensed Insurance Intermediaries under the Insurance Ordinance (F&P Guideline), and Guideline on Continuing Professional Development for Licensed Insurance Intermediaries (CPD Guideline). The F&P and CPD Guidelines come into effect on 23 September 2019.

The fit and proper criteria applicable to licensed insurance agencies, broker companies and relevant individuals is provided for in section 64ZZA of the Insurance Ordinance (Cap 41) (the Ordinance) as amended. It affects the grant and renewal of insurance intermediary licenses, and the imposition, amendment or revocation of license conditions, as well as the approval of responsible officers of licensed insurance intermediaries. Similar to section 14A of the Ordinance, which provides for the fit and proper criteria applicable to certain persons of authorised insurers, section 64ZZA sets out a wide range of matters to be considered, including reputation, character, reliability, honesty and integrity; financial status or solvency; corporate governance structure, and internal controls and risk management. This list is non-exhaustive.

Paragraphs 5 and 6 of the F&P Guideline provide more practical guidance on how the wide range of matters in section 64ZZA will be assessed by the IA against individuals and business entities. However, paragraph 4.7 of the Guideline specifically reserves the IA's discretion to grant approval even if a person fails to meet any of the criteria.

The consultation conclusions highlighted changes in expected minimum education standards for individual licensees (licensed insurance agents and technical representatives (agents and brokers)), which is to be changed from the current completion of Form 5 to attainment of level 2 in 5 subjects in the Hong Kong Diploma of Secondary Education Examination (HKDSE). Other acceptable education qualifications are set out in paragraph 5.2(a) of the F&P Guideline. Those registered with the three current self-regulatory organisations, namely the Insurance Agents Registration Board (IARB), the Hong Kong Confederation of Insurance Brokers (CIB) and the Professional Insurance Brokers Association (PIBA) immediately before or at any time within 2 years before 23 September 2019 will be exempt. Further, the expected minimum education standard for responsible officers of licensed insurance intermediaries will be changed from completion of Form 5 to attainment of a bachelor degree. Those responsible officers registered with IARB or agents or technical representatives registered with the IARB with 15 years' industry experience will be exempt.

Pursuant to the CPD Guideline, the modified requirements increase the minimum number of CPD hours from 10 to 15 and provide for a compulsory 3 CPD hours on 'Ethics or Regulations' topics. A failure to comply may adversely affect fitness and properness. However, these requirements will only take effect at the start of the CPD assessment period beginning 1 August 2021.

These changes received a positive response from the industry in general during the consultation, and are expected to enhance the competence of insurance intermediaries.

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