The Office of the Commissioner of Insurance has so far found no insurers failing to meet the statutory solvency margin requirement as a result of premium cuts since 2004, Secretary for Financial Services & the Treasury Frederick Ma says.

However, he said the office has alerted the board of directors of those insurers which have underwritten substantial employees compensation business and with significant premium rate cut, to get a better understanding of their approach towards the formulation, implementation and supervision of their underwriting policies.

The board of directors, being the ultimate policy makers of the insurers, are urged to strengthen the insurers' corporate governance and monitor the adequacy of their claims reserves, Mr Ma said.

He told lawmakers today the office is concerned about the significant premium rate cut in employees compensation insurance business in 2004 as a result of fierce competition.

In the first half of 2005, the premium rate continued to fall, especially in construction employees compensation business. For certain individual insurers, the drop exceeded 40% on 2004.

Quarterly returns

Mr Ma said since the second quarter of 2005, the office has required insurers to submit quarterly, instead of yearly, returns on employment compensation premium incomes and related information.

Such returns, with a breakdown of the gross premium income on employment compensation business of 10 trades together with the relevant amounts of wages or contract values, will enable the office to assess the average premium in respect of each trade and the premium level of individual insurers for the purpose of ensuring their financial soundness.