A Policyholders' Protection Fund is proposed to be set up in 2013-14 to provide a safety net for policyholders when an insurer becomes insolvent, the Financial Services & the Treasury Bureau has announced, after reviewing conclusions of a public consultation exercise.
Secretary for Financial Services & the Treasury Prof KC Chan said such a fund would enhance the insurance industry's stability and competitiveness.
The Government aims to introduce the bill into LegCo in the 2012-13 legislative session for setting up the fund in 2013-14 at the earliest, he added.
It would comprise life and non-life schemes, and focus on individual policyholders while also covering building owners' corporations.
It would cover small and medium enterprises, recognising that they have less resources to assess insurers' financial ability.
All authorised direct life and non-life insurers will be required to participate in the fund. The compensation limit would likely be $1 million.
Any compensation would be 100% for the first $100,000 of any claim, plus 80% of the balance, up to the compensation limit. The proposed compensation limit would be able to meet 90% to 100% of the claims arising from about 90% of life policies, and fully meet the claims of about 96% of non-life policies.
When an insurer becomes insolvent, the fund would help facilitate the transfer of life policies and accident and health policies with guaranteed renewability to a replacement insurer. For non-life policies, it would provide for continuity of coverage until their expiry.
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here to see the final proposals.
