According to the South China Morning Post, the Securities and Futures Commission will require all insurance companies which sell ILAS products to sign a confirmation form by the end of July stating they have internal controls in place to ensure the products are fair to investors.
The SCMP said a circular it had seen contains a14 new general principles to “remind product providers of their duty to consider investors' interests as part of the product-design process".
It added that insurers must have internal committees to approve new products which in turn must have proper risk management in place. Fees should also be set at a fair and appropriate level. Failure to comply would lead to a ban in offering such products.
The news comes one week before lawmakers in the country debate details of a bill which would establish an Insurance Authority next year as part of a major reform of the insurance industry.
The SCMP said this “would tighten regulations for the 80,000 insurance salespersons by requiring them to apply for a licence from the Insurance Authority, which could impose penalties, including a maximum fine up to HK$10m.
Quoting a source the report added: “The proposed Insurance Authority would bring better regulation and better investor protection to policyholders.”
At the time, the Hong Kong Federation of Insurers told International Adviser: “At the moment, the regulatory environment surrounding open architecture products such as PPBs is being examined.
“However, no firm conclusions have been reached as to the future of this type of structure in Hong Kong.”
Last April, a new law making it mandatory for advisers to disclose their commission to investors was introduced, alongside a raft of consumer protecting measures – such as a requirement for providers to contact each client directly to ensure they understand commission will be taken.