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Hong Kong is mulling a bill that seeks to protect policyholders of both life and non-life insurance plans should an insurer become insolvent. Dubbed the “Policy Holder’s Protection Scheme Bill” (PPS), the legislation is expected to be submitted to lawmakers during the 2018-19 legislative session.
Hong Kong already has compensation schemes in place for non-life insurance policies covering motor vehicle third party claims and employees’ work-related injuries. “[T]he 2008 international financial crisis highlighted the need for a more comprehensive compensation fund for protecting policyholders with a view to strengthening their confidence in the insurance market,” the briefing said.
Policyholders covered by the bill include individuals, small and medium enterprises, and owners’ corporations. The proposed PPS comprises one fund worth HK$1.2 billion for life policies, and another worth HK$75 million for non-life policies. The law mandates all life and non-life insurers participate in the PPS and pay 0.07% of their income from premiums for all policies to establish the funds.
The bill additionally proposes a compensation limit of 100% for the first HK$100,000 of any claim, plus 80% of the balance up to a total of HK$1 million. For life insurance, the compensation limit would be applied on a per-policy basis; for non-life insurance, the compensation limit would be applied on a per-claim basis.
