Hong Kong’s Insurance Authority (IA) has launched a consultation on a draft guideline on enterprise risk management (ERM), open to chief executives of all authorised insurers in its jurisdiction.
The consultation is part of the requirements under the proposed risk-based capital (RBC) regime for the insurance industry. RBC seeks to align insurers’ capital requirements with the risks they are exposed to, and to strengthen their risk management capabilities.
According to the IA, the key objective of the proposed ERM guideline is “to nurture a strong risk culture in the insurance industry that will be reflected in the values, attitudes and norms of business behaviour. The board of directors and senior management should take ownership in shaping the risk culture of insurers as business practices and decisions are ultimately driven by the risk culture.”
The draft takes into account the latest international standards formulated by the International Association of Insurance Supervisors, including the relevant insurance core principles. It also proposed a three-tier supervisory system, leading to different requirements for the following:
- insurance groups that are supervised by the IA as the home regulator;
- insurance sub-groups that have insurance operations significant to the Hong Kong insurance market or to its whole group; and
- other insurers that are part of groups supervised by their home supervisors.
The consultation period will end on July 06, and the IA plans to come out with a final ERM guideline by late 2018, with it coming into effect by January 01, 2020.