Lawmakers support Hong Kong plan to introduce safety net for policyholders faced with insurer collapse
- The government proposes three options of maximum payout under the scheme - HK$1 million, HK$2 million, or HK$4 million per policy
- Several lawmakers however worry the proposed plan excludes small- and medium-sized enterprises, and covers only individual policyholders
Lawmakers showed their support for the Hong Kong government’s proposed compensation scheme aimed at protecting policyholders who would get up to HK$4 million (US$636,942) per policy in case an insurer collapses, according to Legislative Council discussions which took place on Monday.
Under the proposed policy holders’ protection scheme, policyholders will pay a levy of up to 0.07 per cent of the premium they pay for each policy to build two funds to cover life insurance and general insurance respectively.
The government proposed three options of maximum payout from the scheme - HK$1 million, HK$2 million, or HK$4 million per policy. The bigger the cap of payout, the longer it would take to build the pool of compensation funds with the expected time for the pool to build up ranging from six to 14 years.
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The proposal followed a three-month government consultation which concluded last Friday, and the lawmakers’ support now paves the way for the legislative groundwork necessary for the introduction of compensation funds.
“Hong Kong already has compensation funds to protect depositors in case of the collapse of a bank, while the securities sector also has compensation funds to pay investors in case of the collapse of a broker,” said Robert Lee Wai-wang, lawmaker who represents the financial services sector.
