Insurance Ordinance

References in this Ordinance to an insurer include an insurer incorporated, established or formed in Hong Kong, or re-domiciled to Hong Kong, and carrying on insurance business outside Hong Kong, whether or not the insurer is also carrying on insurance business in or from Hong Kong.

A person shall not be deemed to carry on insurance business in or from Hong Kong by reason only that any person acts as his agent for the purpose of settling claims under contracts of goods in transit insurance entered into wholly outside Hong Kong in respect of goods consigned to Hong Kong.

A person shall not be deemed to be within the meaning of any provision of this Ordinance a person in accordance with whose directions or instructions the directors of a company or other body corporate or any of them are accustomed to act by reason only that the directors of the company or body act on advice given by him in a professional capacity.

An insurer which is a company is subject to the Companies Ordinance (Cap. 622) and the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), as well as to this Ordinance, except that, where there is any conflict between this Ordinance on the one hand and the Companies Ordinance (Cap. 622) or the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) on the other, this Ordinance prevails.

A note located in the text of this Ordinance is provided for information only and has no legislative effect.

The classes of insurance business relevant for the purposes of this Ordinance shall be those specified in Schedule 1 and the provisions of that Schedule shall have effect accordingly.

If, in the opinion of the Authority, a non-HK insurer carries on a majority of its insurance business in or from Hong Kong, the Authority may, by a written notice served on the insurer, designate the insurer as a designated insurer.

If, in the opinion of the Authority, a non-HK insurer designated under subsection (1) no longer carries on a majority of its insurance business in or from Hong Kong, or becomes a re-domiciled insurer, the Authority may, by a written notice served on the insurer, withdraw the designation.

If the Authority makes a designation under subsection (1) or withdraws a designation under subsection (2), the Authority must, as soon as practicable after the designation or withdrawal, publish in the Gazette a notice of the designation or withdrawal.

If a non-HK insurer becomes a re-domiciled insurer under subsection (1), the date on which it is deregistered from its place of incorporation is taken to be the date on which it becomes a re-domiciled insurer.

Before a non-HK insurer applies under section 820B of the Companies Ordinance (Cap. 622) for registration as a re-domiciled company for the purposes of subsection (1)(a), the non-HK insurer must apply to the Authority for, and receive from it, a letter of no-objection to the registration.

After deciding on a non-HK insurer’s application under subsection (3), the Authority must give the insurer a written notice of the result of the application.

If the application made under subsection (3) is rejected by the Authority, the notice must include a statement of the reasons for the rejection.

Such a company becomes a re-domiciled insurer if it becomes an authorized insurer.

The Authority must, as far as practicable, make the register available to any person for inspection free of charge on the Internet.

Where an application for approval under subsection (1)(c) is made, the applicant shall furnish such information in respect thereof as the Authority may require.

A policy holder who in pursuance of subsection (1)(b) opts to void a contract of insurance before the expiration of the contract shall be entitled to recover any consideration paid by him under the contract.

Where a contract of insurance in relation to any class of insurance business (being reinsurance business) is entered into by an insurer in contravention of section 6(1), the contract shall not be void or voidable by reason only of that contravention.

This section shall not apply to a contract of insurance entered into before the commencement of the Insurance Companies (Amendment) Ordinance 1990 (44 of 1990).

Any company may make application in writing to the Authority for authorization to carry on any class of insurance business.

The Authority shall not authorize a company under this section if it appears to the Authority that any person who is a director or controller of the company is not a fit and proper person to hold the position held by him.

For the purposes of subsection (2)(a) and (b), if the Authority considers that a person is not a fit and proper person to hold the relevant position, the Authority must notify the company in writing of the fact and the reason for that opinion.

In this Ordinance, except as otherwise defined by section 13A(12), 64F or 80(1), (), in relation to a special purpose insurer, means an individual who (alone or jointly with others) is responsible for the administration of the whole business of the special purpose insurer.

The Authority may, by a written notice served on an applicable company, vary a requirement prescribed by virtue of subsection (2) that applies to the company if the Authority is satisfied, on reasonable grounds, that it is prudent to make the variation so that the requirement for the company is commensurate with the risks associated with the company.

Where the Authority refuses to authorize a company under section 8 on the ground (or, if more than one, on grounds which include the ground) that any person as mentioned in subsection (2) of that section is not a fit and proper person to hold the position held by him, the Authority shall notify the company in writing of that fact and the name of the person whose fitness is in question.

Where notice of a refusal is given to a company under subsection (1), a copy thereof shall at the same time be sent by registered post to the person whose fitness is in question.

Where the Authority refuses to authorize a company under section 8(1)(b)(ii) or 8A(1)(b)(ii), the Authority must notify the company in writing of that refusal.

Where any authorization is granted subject to conditions imposed under section 8(1)(a) or 8A(1)(a), the Authority may, by serving a notice in writing on the authorized insurer concerned, amend or revoke a condition or impose a new condition that is reasonable in the circumstances.

Any condition referred to in subsection (1) which was in effect immediately before the commencement of the Insurance Companies (Amendment) Ordinance 1988 (34 of 1988) shall continue to have effect until it is revoked under that subsection.

If a condition referred to in subsection (1) is amended or revoked or a new condition is imposed, the Authority may direct that the register kept under section 5H be amended accordingly.

Where it appears to the Authority that an authorized insurer does not intend to effect any contracts of insurance after any anniversary referred to in subsection (1), the Authority may waive the payment of the fee payable by the insurer under that subsection in respect of that and any subsequent anniversary; but any such waiver may be revoked at any time by the Authority by notice in writing to the insurer, with effect from the date of such notice.

An authorized insurer must ensure that the capital requirements for the insurer are at all times complied with.

The Authority may, by rules made under section 129(1), prescribe requirements for an authorized insurer to report to the Authority any information relevant to the compliance with the capital requirements for the insurer (including requirements as to how and when such a report must be made).

An authorized insurer must comply with a requirement prescribed by virtue of subsection (2) that applies to the insurer.

An authorized insurer must not appoint an individual as a controller of the insurer unless the Authority has approved the appointment under subsection (2).

The Authority must not approve the appointment of an individual as a controller of the authorized insurer unless it is satisfied that the individual is a fit and proper person to be so appointed.

After deciding on the application, the Authority must give the authorized insurer and the individual a notice in writing of the result of the application.

If the application is rejected, the notice must include a statement of the reasons for the rejection.

Subject to subsection (9), the Authority may, by serving a notice in writing on an authorized insurer and an individual, revoke the approval of the appointment of the individual as a controller of the insurer (given under subsection (2) or taken to be given by virtue of subsection (6A), (6B) or (6C)) if it appears to the Authority that the individual is not, or is no longer, a fit and proper person to be so appointed.

The authorized insurer must, by the date specified in the notice under subsection (7), terminate the appointment of the individual as a controller of the insurer.

If representations are made under subsection (9), the Authority must take them into consideration before serving a notice under subsection (7).

An individual appointed as a controller of an authorized insurer in contravention of section 13A(1) must not act or continue to act as such a controller.

An individual appointed as a controller of an authorized insurer must not continue to act as such a controller after the date specified in the notice served on the individual under section 13A(7).

An HK insurer or designated insurer must not appoint a person as a director of the insurer unless the Authority has approved the appointment under subsection (2).

The Authority must not approve the appointment of a person as a director of the HK insurer or designated insurer unless it is satisfied that the person is a fit and proper person to be so appointed.

After deciding on the application, the Authority must give the HK insurer or designated insurer and the person a notice in writing of the result of the application.

If the application is rejected, the notice must include a statement of the reasons for the rejection.

Subject to subsection (9), the Authority may, by serving a notice in writing on an HK insurer or designated insurer and a person, revoke the approval of the appointment of the person as a director of the insurer (given under subsection (2) or taken to be given by virtue of subsection (6A) or (6B)) if it appears to the Authority that the person is not, or is no longer, a fit and proper person to be so appointed.

The HK insurer or designated insurer must, by the date specified in the notice under subsection (7), terminate the appointment of the person as a director of the insurer.

If representations are made under subsection (9), the Authority must take them into consideration before serving a notice under subsection (7).

A person appointed as a director of an authorized insurer in contravention of section 13AC(1) must not act or continue to act as such a director.

A person appointed as a director of an authorized insurer must not continue to act as such a director after the date specified in the notice served on the person under section 13AC(7).

This section does not apply to a special purpose insurer.

An authorized insurer which is not a captive insurer must not appoint an individual as a key person in control functions of the insurer unless the Authority has approved the appointment under subsection (2).

The Authority must not approve the appointment of an individual as a key person in control functions of the authorized insurer unless it is satisfied that the individual is a fit and proper person to be so appointed.

After deciding on the application, the Authority must give the authorized insurer and the individual a notice in writing of the result of the application.

If the application is rejected, the notice must include a statement of the reasons for the rejection.

Subject to subsection (9), the Authority may, by serving a notice in writing on an authorized insurer and an individual, revoke the approval of the appointment of the individual as a key person in control functions of the insurer (given under subsection (2) or taken to be given by virtue of subsection (6A), (6B) or (6C)) if it appears to the Authority that the individual is not, or is no longer, a fit and proper person to be so appointed.

The authorized insurer must, by the date specified in the notice under subsection (7), terminate the appointment of the individual as a key person in control functions of the insurer.

If representations are made under subsection (9), the Authority must take them into consideration before serving a notice under subsection (7).

For the purposes of the definition of in subsection (12), it does not matter whether the individual is solely responsible, or is jointly responsible with other key persons in control functions of the authorized insurer, for the performance of the relevant functions.

Subject to subsection (15), the Financial Secretary may, by notice published in the Gazette, specify a function to be a control function under subsection (12).

The Financial Secretary must not specify a function to be a control function unless the Financial Secretary is satisfied that the function is likely to enable the individual responsible for the performance of the function to exercise a significant influence on the business carried on by an authorized insurer.

The Authority may impose any conditions that it considers appropriate on the approval when the approval is given.

The Authority may also impose any conditions that it considers appropriate on the approval after the approval is given or taken to be given.

The Authority may amend or revoke any conditions imposed under subsection (2) or (3).

The power under subsection (2), (3) or (4) is only exercisable by notice in writing served on the authorized insurer and the individual or person.

A notice under subsection (5) must, in the case of any conditions being imposed or amended, include a statement of reasons for imposing or amending the conditions.

An imposition, amendment or revocation of any conditions under subsection (2), (3) or (4) takes effect at the time the notice under subsection (5) is served on the authorized insurer and the individual or person or at the time specified in the notice, whichever is the later.

In this section, a reference to an opportunity to make representations is a reference to an opportunity to make written representations or oral representations.

A person who commits an offence under subsection (1) or (2) is liable to a fine at level 5 and to imprisonment for 6 months.

A person must not become a majority shareholder controller of an authorized insurer unless the Authority approves under subsection (2B) the person to be such a majority shareholder controller, regardless of whether the person is a minority shareholder controller of the insurer before becoming such a majority shareholder controller.

The Authority must reject an application made under subsection (2B)(a) for the approval of a person to be a minority shareholder controller or a majority shareholder controller of an authorized insurer unless it is satisfied that the person is a fit and proper person to be such a shareholder controller.

If representations are made under subsection (2F), the Authority must take them into account before rejecting the application.

After deciding on the application, the Authority must give the person and the authorized insurer a written notice of the result of the application.

If the application is rejected, the notice must state the reasons for the rejection.

If a person is a minority shareholder controller or a majority shareholder controller of a non-HK insurer immediately before the insurer is designated as a designated insurer under section 3B(1), the person is taken to be approved under subsection (2B) as such a shareholder controller on the date of designation.

If a person is a minority shareholder controller or a majority shareholder controller of a non-HK insurer immediately before the date on which the non-HK insurer becomes a re-domiciled insurer under section 3BA(1), the person is taken to be approved under subsection (2B) as such a shareholder controller of the re-domiciled insurer on that date.

No transaction relating to the acquisition of voting power in an authorized insurer is void or voidable by reason only of a contravention of subsection (2) or (2A).

Subject to subsection (10), any person who fails to comply with subsection (2) or (2A) commits an offence and is liable to a fine of $200,000 and, in the case of an individual, to imprisonment for 2 years.

Where a person is charged with an offence under subsection (9), it is a defence to prove that the person did not know that the acts or circumstances as a result of which the person became a minority shareholder controller or a majority shareholder controller (as the case may be) of the insurer concerned were such as to have that effect.

Any person who fails to comply with subsection (3) commits an offence and is liable to a fine of $200,000 and, in the case of an individual, to imprisonment for 2 years, together with a fine of $2,000 for each day on which the offence continues.

If it appears to the Authority that a person who is a minority shareholder controller of an authorized insurer is not, or is no longer, a fit and proper person to be such a minority shareholder controller, the Authority may, by a written notice served on the person, object to the person being such a minority shareholder controller.

A notice under subsection (3) or (4) (notice of objection) must state the grounds for the objection.

If representations are made under subsection (7), the Authority must take them into account before serving the notice of objection.

The Authority may, by a written notice served on a person, revoke a notice of objection served on the person if it appears to the Authority that the grounds for the objection no longer exist.

If a person, on ceasing to be a majority shareholder controller of an HK insurer or designated insurer (other than a special purpose insurer), becomes a minority shareholder controller of the insurer, the person must, within 1 month after becoming such a minority shareholder controller, notify the Authority in the specified form.

A person who complies with subsection (1) or (2) is taken to be approved to be a minority shareholder controller of the insurer under section 13B(2B).

If a person is charged with an offence under subsection (4), it is a defence for the person to establish that the person took all reasonable precautions and exercised all due diligence to avoid the commission of the offence.

Where shares are subject to the restrictions under subsection (2)(a), any agreement to transfer the shares or, in the case of unissued shares, the right to be issued with them, shall be void.

Where shares are subject to the restrictions under subsection (2)(c) or (d), an agreement to transfer any right to be issued with other shares in right of those shares, or to receive any payment on them (otherwise than in a liquidation) shall be void.

Subject to subsection (7), the Court of First Instance may, on the application of the Authority, order the sale of any specified shares to which this section applies and, if they are for the time being subject to any restrictions under subsection (2), that they shall cease to be subject to those restrictions.

Where an order has been made under subsection (5) the Court of First Instance may, on the application of the Authority, make such further order relating to the sale or transfer of the shares as it thinks fit.

Where shares are sold in pursuance of an order under this section the proceeds of the sale, less the costs of the sale, shall be paid into court for the benefit of the persons beneficially interested in them, and any such person may apply to the Court of First Instance for an order that the whole or part of the proceeds to be paid to him.

A copy of a notice in writing served under subsection (2) or (6) on the person concerned shall be served on the insurer to whose shares it relates and, if it relates to shares held by an associate within the meaning of section 9(4), or a nominee, of that person, on that associate or nominee, as the case may be.

Where shares in an authorized insurer are issued in contravention of restrictions under section 13C(2), or payments are made by an authorized insurer in contravention of such restrictions, the insurer commits an offence and is liable to a fine at level 4 and, in the case of an individual who commits the like offence by virtue of section 124, to imprisonment for 6 months.

Any person who fails to comply with subsection (1), (2) or (3) commits an offence and is liable to a fine of $200,000 and, in the case of an individual, to imprisonment for 2 years, together with a fine of $2,000 for each day on which the offence continues.

The obligations imposed on the Authority under subsection (1) are in addition to those of the Authority to have regard to any other matter that the Authority considers relevant in making the determination.

An authorized insurer must make a first appointment under subsection (1) within 1 month after the date on which the authorized insurer begins to carry on insurance business.

After an appointment under subsection (1) comes to an end, the authorized insurer must, as soon as practicable, make a fresh appointment under that subsection.

An authorized insurer making an appointment under subsection (1) must within 1 month after making the appointment serve on the Authority a notice of the appointment in writing stating the name and qualifications of the person appointed.

An authorized insurer which contravenes subsection (1), (2), (2A) or (3) commits an offence and is liable to a fine at level 4, together with a further fine of $1,000 for each day on which the offence continues.

Subsection (1)(c) and (d) does not apply to an authorized insurer that is exempted under the rules made under section 129(1)(cb).

An authorized insurer must make a first appointment under subsection (1)(a) within 1 month after the date on which the authorized insurer begins to carry on long term business.

An authorized insurer must make a first appointment under subsection (1)(b) within 1 month after the date on which the authorized insurer begins to carry on long term business in or from Hong Kong.

After an appointment under subsection (1) comes to an end, the authorized insurer must, as soon as practicable, make a fresh appointment under that subsection.

An authorized insurer that makes an appointment under subsection (1) must, within 1 month after making the appointment, serve on the Authority a written notice of the appointment.

An authorized insurer must not appoint a person as its actuary under section 15AAA(1) unless the Authority has approved the appointment under subsection (2).

The Authority must not approve the appointment of a person as an actuary of the authorized insurer unless it is satisfied that the person is a fit and proper person to be so appointed.

After deciding on the application, the Authority must give the person and the authorized insurer a written notice of the result of the application.

If the application is rejected, the notice must state the reasons for the rejection.

This section applies if the Authority approves the appointment of a person as an actuary of an authorized insurer under section 15AAAB(2).

The Authority may impose any conditions that it considers appropriate on the approval when the approval is given.

The Authority may also impose any conditions that it considers appropriate on the approval after the approval is given or taken to be given.

The Authority may amend or revoke any conditions imposed under subsection (2) or (3).

The power under subsection (2), (3) or (4) is only exercisable by notice in writing served on the authorized insurer and the person.

A notice under subsection (5) must, in the case of any conditions being imposed or amended, include a statement of reasons for imposing or amending the conditions.

An imposition, amendment or revocation of any conditions under subsection (2), (3) or (4) takes effect at the time the notice under subsection (5) is served on the authorized insurer and the person or at the time specified in the notice, whichever is the later.

In this section, a reference to an opportunity to make representations is a reference to an opportunity to make written representations or oral representations.

Subject to subsection (4), the Authority may, by a written notice served on an authorized insurer and the person appointed as the insurer’s actuary under section 15AAA(1) (relevant person), revoke the approval under section 15AAAB(2) if it appears to the Authority that the relevant person is not, or is no longer, a fit and proper person to be so appointed.

The insurer must, by the date specified in the notice under subsection (1), terminate the appointment.

If representations are made under subsection (5), the Authority must take them into consideration before serving a notice under subsection (1).

A person who commits an offence under subsection (1) or (2) is liable to a fine at level 5 and to imprisonment for 6 months.

An authorized insurer which fails to comply with subsection (1) commits an offence and is liable to a fine at level 4, together with a further fine of $1,000 for each day on which the offence continues.

Where a person is charged with an offence under subsection (3), it shall be a defence if the person charged proves that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence.

If, after the appointment of an actuary under section 15AAA(1), there is any change to the particulars in respect of the actuary and the particulars fall within a type of particulars set out in the form specified by the Authority for the purposes of this subsection, the authorized insurer must, within 1 month after the date on which the change takes place, notify the Authority of the change in the specified form.

An authorized insurer which fails to comply with subsection (1) or (1A) commits an offence and is liable to a fine at level 4, together with a fine of $1,000 for each day on which the offence continues.

Where a person is charged with an offence under subsection (3), it shall be a defence if the person charged proves that he took all reasonable precautions and exercised all due diligence to avoid the commission of the offence.

Without prejudice to the Companies Ordinance (Cap. 622) and the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32), every authorized insurer shall cause to be kept proper books of account which may be kept either in a legible form or in a non-legible form capable of being reproduced in a legible form; but where any such books are kept otherwise than by making entries in a bound book, adequate precautions shall be taken for guarding against falsification and facilitating its discovery.

Proper books of account, for the purposes of this section, are books of account which (in themselves or, if kept under subsection (1) otherwise than in a legible form, as reproduced in a legible form) sufficiently exhibit and explain all transactions entered into by the insurer in the course of any business carried on by the insurer.

If any books of account required to be kept by this section are kept by an authorized insurer by recording the matters in question otherwise than in a legible form, any power conferred by this Ordinance to require production of such books or to take copies thereof or extracts therefrom shall be construed as including power to require production of, and to take away, a reproduction of the recording or of the relevant part of it in a legible form.

Any books of account required to be kept by this section shall be preserved by the insurer for 7 years from the end of the financial year to which the last entry made or matter recorded therein relates.

An authorized insurer served with the notice which, without reasonable excuse, fails to comply with it commits an offence and is liable to a fine at level 5.

The Authority may, at the written request of an authorized insurer, vary a requirement prescribed by virtue of subsection (1) that applies to the insurer.

In this section, for an authorized insurer described in section 21B(4) or (7), a reference to the insurer’s long term business is a reference to the insurer’s long term business carried on in or from Hong Kong.

In subsection (1), for an authorized insurer described in section 25AA(3) or (5), a reference to the insurer’s general business is a reference to the insurer’s general business carried on in or from Hong Kong.

Classes or descriptions of agreements or arrangements appearing to the Authority as likely to be undesirable in the interests of policy holders may be prescribed for the purposes of this section, and every authorized insurer which enters into an agreement or arrangement of a class or description so prescribed shall, within such period as may be prescribed, furnish the Authority with a statement containing such particulars of that agreement or arrangement as may be prescribed.

Different classes or descriptions of agreements or arrangements may be prescribed for the purposes of this section in relation to authorized insurers of different classes or descriptions.

The whole or any part of any statement furnished to the Authority under this section may be deposited by the Authority with the Registrar of Companies for registration and may be published by the Authority in such ways as the Authority thinks appropriate.

The Authority may, at the written request of an authorized insurer, vary a requirement prescribed by virtue of subsection (1) that applies to the insurer.

Also, the insurer must, within the fund maintained under subsection (2)(d), maintain at least 1 separate account and 1 separate sub-fund for the part of the specified business that is participating business.

Also, the insurer must, within the fund maintained under subsection (5)(d), maintain at least 1 separate account and 1 separate sub-fund for the part of the specified business (other than long term reinsurance business with offshore risk) that is participating business.

Subsections (8) and (9) apply to a non-HK insurer in relation to which an election under section 22B(1) is in effect.

Also, the insurer must, within the fund maintained under subsection (8)(d), maintain at least 1 separate account and 1 separate sub-fund for the part of the specified business that is participating business.

For a non-HK insurer that carries on long term business in or from Hong Kong, the Authority may, at the request in writing of the insurer, permit the insurer to maintain accounts of other insurance business closely related to the long term business or part of it as part of an account maintained under section 21B.

For each fund or sub-fund maintained by an authorized insurer under section 21B, the aggregate value of the assets representing the fund or sub-fund must not be less than the amount of the liabilities attributable to the part of its business for which the fund or sub-fund is maintained.

For each fund maintained by an authorized insurer under section 21B(2)(b) or (c), (5)(b) or (c) or (8)(b) or (c), the aggregate value of the assets representing the fund must not be less than the account balance of the fund.

If subsection (1), (2), (3), (3A), (3B) or (3C) is not complied with in relation to an authorized insurer, the insurer commits an offence and is liable to a fine of $1,000,000 and, in the case of a continuing offence, to a further fine of $20,000 for each day during which the offence continues.

For a non-HK insurer that carries on long term business, the Authority may, at the request in writing of the insurer, permit the insurer to comply with section 21B(2) and (3), instead of section 21B(5) and (6), for the period specified in the permission.

The Authority must, as soon as practicable after giving the permission, publish a notice in the Gazette stating the name of the insurer and the fact that the permission has been given.

A non-HK insurer (other than a designated insurer and an insurer in relation to which a permission under section 22A(1) is in effect) may, by a written notice, elect to comply with section 21B(8) and (9), instead of section 21B(5) and (6).

The insurer may, by a written notice, withdraw the election under subsection (1).

Subject to subsections (1A), (2) and (3) and section 45(2), the assets representing a fund maintained by an authorized insurer under section 21B(2), (5) or (8) for a part of its business may only be applied for that part of the business.

Subject to subsection (3) and section 45(2), the assets representing a sub-fund maintained by an authorized insurer under section 21B(3), (6) or (9) for a part of its participating business (as defined by section 21B(11)) may only be applied for that part of the business or in accordance with the profit-sharing mechanism to which the business relates.

Subsections (1) and (1A) do not preclude an authorized insurer from exchanging, at fair market value, assets representing a fund or sub-fund maintained by the insurer under section 21B for other assets of the insurer.

Any mortgage or charge is void to the extent to which it contravenes subsection (1) or (1A).

To avoid doubt, money from a fund or sub-fund maintained by an authorized insurer under section 21B may not be used for any other part of the business of the insurer apart from the part of the business for which the fund or sub-fund is maintained despite any arrangement for its subsequent repayment out of the receipts of that other part of the business.

An authorized insurer, or a body corporate of which an authorized insurer is a subsidiary, must not declare a dividend to shareholders at any time when section 22(3), (3A), (3B) or (3C) is not complied with.

An authorized insurer or body corporate which fails to comply with subsection (1), (1A) or (6) commits an offence and is liable to a fine of $1,000,000 and, in the case of a continuing offence, to a further fine of $20,000 for each day during which the offence continues.

Where it is proposed to carry out a scheme under which the whole or part of the long term business carried on in Hong Kong by an authorized insurer (the transferor company) is to be transferred to another insurer (the transferee company) the transferor company or transferee company may apply to the Court of First Instance, by petition, for an order sanctioning the scheme.

The Court of First Instance shall not determine an application under this section unless the petition is accompanied by a report on the terms of the scheme by an independent actuary and the Court of First Instance is satisfied that the requirements of subsection (3) have been complied with.

Each of the insurers concerned shall furnish a copy of the petition and of the report mentioned in subsection (2) to any person who asks for one at any time before an order sanctioning the scheme is made on the petition.

The Court of First Instance shall not make an order sanctioning the scheme unless it is satisfied that the transferee company is, or immediately after the making of the order will be, authorized to carry on any long term business to be transferred under the scheme.

No such transfer as is mentioned in subsection (1) shall be carried out unless the scheme relating to the transfer has been sanctioned by the Court of First Instance in accordance with this section; and no order shall be made under section 673 or 675 of the Companies Ordinance (Cap. 622) in respect of so much of any compromise or arrangement as involves any such transfer.

Any insurer which fails to comply with subsection (4) commits an offence and is liable to a fine at level 4.

Where any such order provides for the transfer of property or liabilities, that property shall, by virtue of the order, be transferred to and vest in, and those liabilities shall, by virtue of the order, be transferred to and become the liabilities of, the transferee company, and in the case of any property, if the order so directs, freed from any mortgage or charge which is by virtue of the scheme to cease to have effect.

For the purposes of any provision requiring the delivery of an instrument of transfer as a condition for the registration of a transfer of any property (including in particular sections 150 and 320 of the Companies Ordinance (Cap. 622)) an order which by virtue of this section operates to transfer any property shall be treated as an instrument of transfer.

Where a scheme is sanctioned by an order of the Court of First Instance under section 24 the transferee company shall, within 10 days from the date on which the order is made or such longer period as the Authority may allow, deposit 2 office copies of the order with the Authority.

Any person who fails to comply with subsection (4) commits an offence and is liable to a fine at level 4.

The insurer must maintain a separate account and a separate fund for the part of its business that is general business.

Subsection (6) applies to a non-HK insurer in relation to which an election under section 25AAD(1) is in effect.

The insurer must maintain a separate account and a separate fund for the part of its business that is general business carried on in or from Hong Kong.

For a fund maintained by an authorized insurer under section 25AA(4)(a), the aggregate value of the assets representing the fund must not be less than the amount of the liabilities attributable to the part of its business for which the fund is maintained.

For a non-HK insurer that carries on general business, the Authority may, at the written request of the insurer, permit the insurer to comply with section 25AA(2), instead of section 25AA(4), for the period specified in the permission.

The Authority must, as soon as practicable after giving the permission, publish a notice in the Gazette stating the name of the insurer and the fact that the permission has been given.

A non-HK insurer (other than a designated insurer and an insurer in relation to which a permission under section 25AAC(1) is in effect) may, by a written notice, elect to comply with section 25AA(6), instead of section 25AA(4).

The insurer may, by a written notice, withdraw the election under subsection (1).

Subject to subsections (2) and (3), the assets representing a fund maintained by an authorized insurer under section 25AA for a part of its business may only be applied for that part of the business.

Subsection (1) only applies to the part of the assets necessary to secure compliance with section 25AAB(3) and (4).

Subsection (1) does not preclude an authorized insurer from exchanging, at fair market value, assets representing a fund maintained by the insurer under section 25AA for other assets of the insurer.

Any mortgage or charge is void to the extent to which it contravenes subsection (1).

To avoid doubt, money from a fund maintained by an authorized insurer under section 25AA may not be used for any other business of the insurer apart from the part of its business for which the fund is maintained despite any arrangement for its subsequent repayment out of the receipts of that other business.

An authorized insurer, or a body corporate of which an authorized insurer is a subsidiary, must not declare a dividend to shareholders at any time when section 25AAB(3) or (4) is not complied with.

Where the Authority is satisfied that there are special or unusual circumstances that make it impracticable for an authorized insurer to comply with the requirements of this section, the Authority may, provided the Authority is satisfied with the financial status of the insurer, exempt the insurer in whole or in part from the requirements of this section and the Authority may attach such conditions to, or limitations in respect of, the exemption as the Authority considers appropriate including, without limiting the foregoing, a limitation on the duration of the exemption.

The requirements under subsection (3) to maintain assets in Hong Kong shall be relieved to the extent, if any, of any assets which an authorized insurer is, by the laws of any place outside Hong Kong, required to and does maintain in that place and which would, upon the liquidation of the insurer, fall within the description of assets that is contained in section 265(1)(e)(i) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32).

Where the Authority is of the opinion that an authorized insurer’s insurance liabilities mentioned in section 25A(3A) would be significantly greater if determined as of a day later than the date as of which the liabilities are required to be determined in accordance with the rules made under section 129, the Authority may, by notice sent to the insurer, direct the insurer to re-determine the liabilities as of a date specified in the notice, and the Authority may specify the manner of re-determination, and, in that case, the insurer must re-determine the liabilities as of the date and in the manner, if any, specified in the notice.

Where an authorized insurer receives a notice under this section, it must forthwith in the manner specified, if any, re-determine the liabilities as of the specified date and, if the liabilities are greater than those determined under section 25A, it must, not later than 3 months after the date it received the notice, commence maintaining assets in Hong Kong in accordance with section 25A, as modified by this section, and the insurer must continue to so maintain assets in Hong Kong until the next determination of the liabilities under section 25A.

An authorized insurer that fails to comply with subsection (3) commits an offence and is liable to a fine at level 4 and a further fine of $1,000 for each day on which the insurer continues to fail to notify the Authority or file the statement after the expiry of the 3 month period referred to in that subsection.

An authorized insurer may, instead of maintaining assets in Hong Kong as required by section 25A or 25B, substitute, in whole or in part, a letter of credit or other commitment from a bank, as defined in the Banking Ordinance (Cap. 155), in favour of the Authority, but the terms and conditions attached to such a letter of credit or other commitment are subject to the approval of the Authority.

The Authority may, if in its opinion it would appropriately safeguard the interests of policy holders or potential policy holders, exercise its right to payment pursuant to a letter of credit or other commitment referred to in subsection (1).

Any payment made to the Authority pursuant to a letter of credit or other commitment shall be held in trust for the insurer as if it were a deposit made by an authorized insurer under section 35A(1).

Nothing in this section shall limit the powers of the Authority to require a deposit under section 35A(1).

Where it is proposed to execute an instrument by which an authorized insurer (the transferor) is to transfer to another insurer (the transferee) all its rights and obligations under such general policies, or general policies of such descriptions, as may be specified in the instrument, the transferor may apply to the Authority for its approval of the transfer.

The notice referred to in subsection (4) shall include a statement that written representations concerning the transfer may be sent to the Authority before a day specified in the notice, which shall not be earlier than 60 days after the day of the first publication of the notice in accordance with subsection (4)(a); and the Authority shall not determine the application until the Authority has considered any representations made to the Authority before the specified day.

The transferor shall furnish a copy of the report mentioned in subsection (4)(b)(iii) to any person having an interest in the transfer who asks for one at any time before the transfer is approved or refused by the Authority.

The Authority may, by notice in writing, require the transferor or the transferee to supply the Authority with such information as the Authority considers necessary to enable the Authority to determine an application.

Except insofar as the Authority may otherwise direct, a policy holder whose policy is included in such an instrument shall not be bound by it unless he has been given written notice of its execution by the transferor or the transferee.