The Hong Kong government has proposed hiring a consultant to study the possible spin-off of the Insurance Authority into an independent agency, mirroring the operating models of other financial market watchdogs. The proposal will be the government's second attempt, as opposition from the insurance industry and lawmakers scuppered a similar plan in 2003. Insurers are concerned the move may lead to higher licence fees as the government is likely to end financial subsidies to the authority. Clement Cheung Wan-ching, the commissioner of insurance who heads the authority, said the regulator should be a financially independent agency, giving it more flexibility to hire experts and adopt a more modern regulatory model. As a government division, all of the authority's 90 staff are paid in accordance with the civil service salary scale, making it difficult to compete with the private sector for insurance or actuarial experts. The authority is Hong Kong's last government-run financial regulator. Others, such as the Hong Kong Monetary Authority, the Securities and Futures Commission and the Mandatory Provident Fund Scheme Authority were independent, Mr Cheung said. 'An independently run Insurance Authority will allow Hong Kong to catch up with international practices with a model similar to other financial regulators,' he said. Mr Cheung said the time was right to relaunch the reform proposal because many overseas countries had adopted a new risk-based regulatory model which might save costs for insurance companies in terms of capital requirements. 'Hong Kong can adopt such a sophisticated risk-based model only if the Insurance Authority is able to recruit enough qualified experts,' he said. Insurance industry legislator Bernard Charnwut Chan expressed concern over the proposal. 'If the authority were independent, the government would no longer pay [subsidies] and industry members would pay at least double the current licence fee,' Mr Chan said. 'Also, the hiring of more experts would increase operating costs.' The authority's annual $100 million operating budget is met equally by the government and Hong Kong's 180 registered insurance companies, each of which pays a fixed annual licensing fee of HK$225,000. 'Cost is the major concern,' said MassMutual Asia chief executive Kenneth Yu Yuk-wing. 'Policyholders will suffer as insurers are likely to pass on the increased licence fees to their customers.' Another concern was that the agency would also be required to regulate the 50,000 other agents and brokers now under the supervision of other industry bodies, Mr Chan said. The government would first make the authority independent before considering any possibility of a merger with either the Securities and Futures Commission or the Mandatory Provident Fund Schemes Authority, Mr Cheung said. Merger supporters said the move made sense, with more insurance companies selling investment-linked products and retirement plans.