LCQ8Performanceofgeneralinsuranceindustry(14.6.2000).docVIP

Press Release LCQ8: Performance of general insurance industry Wednesday, June 14, 2000 Following is a question by the Hon Ambrose Lau and a written reply by the Secretary for Financial Services, Mr Stephen Ip, in the Legislative Council today (June 14): Question According to the quarterly newsletter I lens published by the Office of the Commissioner of Insurance last month, the general insurance industry registered poor performance in 1999. Total underwriting losses of the general business insurers for the year reached an unprecedented high level of HK$1,062 million, the worst year since the Insurance Authority started to collect statistics in 1990. In this connection, will the Government inform this Council: (a) of the measures it will adopt to tackle individual insurance companies deficiency in claims reserves; and (b) whether it will adopt measures to prevent cut-throat competition in the insurance industry and the closures of small and medium insurance companies? Reply Madam President, (a) It is incumbent upon an insurer to make adequate provisions for its liabilities, in particular its outstanding claims. If an insurer is found to have under-reserved its claims, by virtue of section 35(1) of the Insurance Companies Ordinance (the Ordinance), the Insurance Authority will require the insurer concerned to top up the reserves to an adequate level either by way of internal transfer of funds from its free reserves or by injection of new capital. If there is no transfer of funds or injection of new capital, the Insurance Authority may consider taking action in accordance with the provisions of the Ordinance to protect the interests of policyholders. The Insurance Authority may, for example, restrict the relevant insurer from undertaking new businesses under section 27 of the Ordinance or limit the volume of business of that insurer under section 31. (b) We believe in free competition and have no intention of interferring with the commercial decision