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New Hong Kong insurance rules would strengthen management of risk, capital: Fitch

September 15, 2020. Print article

Tougher Hong Kong regulations for domestic insurance groups that operate internationally would strengthen their risk and capital management,  said Monday.

has proposed enforcing new rules on the holding companies and overseas subsidiaries of Hong Kong-based insurers. The proposed framework places new rules on these groups pertaining to capital requirements, disclosures, risk and governance.

Fitch said the additional regulations should incentivize the insurance groups to “strengthen the sophistication” of their management of risk and capital adequacy.

The Insurance Authority “will have inspection, investigation, and disciplinary powers against the designated insurance holding company as with authorized insurers,” the New York City-based credit ratings agency said.

The new rules would also bring Hong Kong into better alignment with recent guidance on group-wide supervision from the , Fitch said.

A public consultation for the framework began last month and will continue through the end of September, according to the Insurance Authority.

The newly proposed rules are one of many efforts by the regulator to strengthen insurance supervision in the city, according to a commentary by credit ratings agency AM Best, which came to similar conclusions as Fitch about improvements to risk and capital. The Insurance Authority has recently passed stronger requirements on risk-based capital and enterprise risk management, AM Best said.

The Hong Kong regulator has been collaborating with the to give preferential treatment and capital solvency regimes and reduce compliance costs for the industry, the Oldwick, New Jersey-based credit ratings agency said.