Hong Kong’s Insurance Authority seizes control of Target after motor insurer left thousands of city’s taxis in the lurch

The unprecedented enforcement action was aimed at “maintaining market stability and protecting policy holders’ interest,” the Insurance Authority said
Target Insurance provides motor insurance coverage for minibuses and 60 per cent of the 18,163 taxis that ply Hong Kong’s streets

Hong Kong taxis

Enoch Yiu

Published: 12:39pm, 7 Jan 2022

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Hong Kong’s insurance watchdog seized control of an insurer that left thousands of taxis uninsured, in an unprecedented exercise of enforcement powers after finding the company’s investments in breach of asset allocation regulations.

All the assets and businesses of Target Insurance Company Limited were taken over on Friday, in an enforcement aimed at “maintaining market stability and protecting policyholders’ interest,” according to Hong Kong’s Insurance Authority chief executive Clement Cheung Wan-ching.

The regulator appointed the liquidation expert Derek Lai Kar-yan, who is also vice-chairman of Deloitte China, to take over the management of Target Insurance, with the brief to report within a month about the insurer’s financial condition.

Lai and his team will maintain Target Insurance’s business as usual, but the company is barred from writing any new policies before the Insurance Authority can complete its investigation and ascertain the company’s financial situation, Cheung said.

Target Insurance Company Limited’s logo. Photo: Facebook

“Our inspection found that Target was having difficulties operating, while its investment activities and asset allocation may have failed to follow the requirements of the Insurance Authority,” Cheung said.

Under the Insurance Ordinance (Cap 41), the insurance regulator has a wide range of investigative and enforcement powers to deal with insurers that fail to comply with the law, or engage in misconduct.

Taxis sit in line as they wait for customers in Tsim Sha Tsui on 14 July 2020. Photo: Felix Wong.

Target Insurance, established in 1977, is the largest motor insurer in Hong Kong, providing coverage for mini buses and more than 60 per cent of the 18,163 taxis that ply the city’s streets. With 1.4 per cent of Hong Kong’s general insurance business, Target Insurance has issued 41,000 policies, 80 per cent of which are motor insurance policies while the remainder are for staff compensation.

The insurance company’s biggest shareholder is former chairman Haywood Cheung Tak-hay, with a stake of about 25 per cent, who is also head of the Chinese Gold and Silver Exchange Society (CGSEC), an industry guild. Cheung, unrelated to the insurance regulator, could not be reached for comment.

The authority’s enforcement action came a week after Target Insurance notified more than 8,000 of its owner-operator taxi customers that it would terminate their policy coverage and return their remaining premium with a week’s notice.

Haywood Cheung Tak-hay (centre), former chairman of Target Insurance and president of the Chinese Gold & Silver Exchange Society (CGSE), at the guild’s Lunar New Year opening ceremony in Sheung Wan on 8 February 2019. Photo: Dickson Lee.

“Target Insurance has not informed the Insurance Authority about its action, which is not ideal, as the authority should be informed,” the regulator said.

To keep the city’s taxis insured and on the streets, the Insurance Authority arranged four insurers to step up to provide coverage: Bank of China Group Insurance, China Pacific Insurance (HK), China Taiping Insurance (HK) and CMB Wing Lung Insurance.

The four insurers took over 7,894 of motor insurance policies from Target Insurance as of Friday, according to Simon Lam, executive director of General Business of Insurance Authority.

Shares of Target Insurance plunged 30 per cent in the past one year to 48 Hong Kong cents before trading was halted on Wednesday, pending an announcement. The stock has lost 83 per cent of its value since its listing in 2015.