HK$1m safety net per policy for Hong Kong policyholders in case of insurer collapse
City’s insurers to pay 0.07 per cent of income from premiums for two compensation funds
Insurance policyholders could get protection coverage of up to HK$1 million (US$130,000) if their insurance company collapses, after the Hong Kong government started the legislative procedure to introduce a long-awaited safety net for them, officials told lawmakers on Monday.
The lawmakers, however, questioned if the proposed law would provide sufficient protection to the more than 10 million policyholders in the city.
The Policy Holder’s Protection Scheme Bill will be submitted to lawmakers for discussion during the coming 2018-19 legislative session, Joan Hung, the principal assistant secretary for financial services and the treasury, told lawmakers in a regular monthly meeting of the Panel on Financial Affairs on Monday.
If approved, all insurers in Hong Kong will have to pay 0.07 per cent of their income from premiums for all policies to establish two compensation funds. One, worth HK$1.2 billion, will be for the life insurance sector, and the other, at HK$75 million, will be for general insurers and will be established over 15 years. In case the funds are used up by a big compensation need, the levy will be increased to 1 per cent.
The maximum cover will be HK$1 million per policy, either for life insurance or general insurance, and it will cover individuals as well as small and medium-sized companies.