Hong Kong introduces GWS regulatory framework

Hong Kong’s Insurance Authority (IA) has officially rolled out its new group-wide supervision framework (GWS) and regulatory regime for insurance-linked securities (ILS) business.

Analysts at Moody’s have previously said the use of GWS is expected to help strengthen insurance groups’ capital and risk management, enhance their public disclosure and reduce the scope for regulatory arbitrage.

“The GWS framework is in full alignment with international standards and best practices, positioning Hong Kong as an ideal base for large insurance groups and a coordinator of supervisory efforts among all relevant jurisdictions in Asia Pacific,” said Clement Cheung, Chief Executive Officer of the IA.

He added: “This is a central element of our strategic campaign to reinforce the status of Hong Kong as a global risk management centre and a regional insurance hub.”

The IA has worked with key industry stakeholders to develop GWS guidelines, which lay out new insurance standards for a range of areas, including enterprise risk management, corporate governance, capital requirements and public disclosure.

On regulation of ILS business, the IA is drawing reference from overseas experience while taking into account local circumstances, supported by the Pilot ILS Grant Scheme recently announced by the Financial Secretary.

In addition to the GWS framework and regulatory regime of ILS business, new legislative amendments also seek to expand the scope of insurable risks for captives domiciled in Hong Kong.

Coupled with the tax concessions for all general reinsurance business of direct insurers, selected general insurance business of direct insurers and selected insurance brokerage business, the IA believes these initiatives will support the development of marine and specialty risks insurance in Hong Kong.

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