The Insurance Authority today released a Public Consultation Paper on the feasibility of establishing insurance policyholders' protection funds in Hong Kong. It aims to seek comments from the public on whether such funds should be introduced in Hong Kong, and if so, what their design features should be. 

PricewaterhouseCoopers Hong Kong prepared the paper as part of an independent consultancy study.

Policyholders' protection funds aim to provide a safety net to policyholders where compensation would be paid if an insurer was to run into financial difficulties and be unable to make payments under its insurance policies.

There are no such funds in Hong Kong currently, just two insolvency funds for statutory motor and employees' compensation insurance. 

Other countries offer insurance protection funds

Policyholders' protection funds are common in many advanced economies. However, the types of policies covered by these funds and the extent of protection vary widely in each jurisdiction.

With a view to enhancing the protection of policyholders, we consider it necessary to commission a consultancy study on the feasibility of establishing policyholders' protection funds in Hong Kong, the Commissioner of Insurance Richard Yuen said.

The public consultation forms part of the consultancy study, he added.

It has formed a working party that includes insurers and other stakeholders to deliberate on the feasibility, provide feedback and comments on the options outlined in the consultancy paper and deliberate on major or contentious issues emerging from the public consultation.

Cost implications, moral hazards loom large

"We note that some industry players are concerned about the cost implications and potential moral hazards and therefore have expressed reservations about the concept of establishing policyholders' protection funds in Hong Kong." Said Mr Yuen.

He stressed that the Government has an open mind on the matter and will consider the public's comments before deciding on the way forward.