Year 2007 - Critical Success Factors

What are the critical success factors for Hong Kong Insurance Intermediaries and if CEPA 4 a panacea for them Background CEPA (Closer Economic Partnership Arrangement) is an arrangement concluded between two separated customs territories of a single sovereign state, in conformity with theWorld Trade Organization (WTO) rules, with the objective of promoting joint economic prosperity and development of the Mainland and Hong Kong Special Administrative Region. The coverage of CEPA mainly consists of three parts, they are: (1) trade in goods, (2) trade in services, and (3) trade and investment facilitation. The first phase of CEPA came into effect in 2004. Later on CEPA II & III confirmed the further implementation of zero tariff in trade in goods. CEPA IV & V marked the further liberalization of trade in services. In compliance with the WTO principles and rules, CEPA provides the Hong Kong & Macau service suppliers with an earlier access to the Mainland market, ahead of the timetable China has committed to theWTO. Hong Kong companies under the CEPA enjoy advantages of early liberalization, lowering of threshold, mutual recognition and relaxation of regulations ahead of their counterparts in Europe and America. In the first phase of CEPA concerning the sectors and sub-sectors in financial services, it allows groups formed by Hong Kong insurance companies through re-grouping and strategic mergers to enter the Mainland insurance market subject to established market access conditions (total assets held by the group over US$5 billion; more than 30 years of established experience attributable to one of the Hong Kong insurance companies in the group; and a representative office established in the Mainland for over 2 years).The maximum limit of capital participation by a Hong Kong insurance company in a Mainland insurance company is 24.9%. To allow Hong Kong citizenship, after obtaining the Mainland’s professional qualifications in actuarial science, to practice in the Mainland without prior approval. To allow Hong Kong residents, after obtaining the Mainland’s insurance qualifications and being employed or appointed by a Mainland insurance institution, to engage in the relevant insurance business The Supplement IV to CEPA in 2007, in the CEPA Liberalization Measures, will be more related to intermediaries in Hong Kong. There are specific commitments: To allow setting up of an examination centre in Hong Kong for the Mainland qualifying examinations for insurance intermediaries. To allow Hong Kong insurance agency companies to set up wholly owned enterprises in the Mainland to provide insurance agency services to the Mainland insurance companies. Applicants should meet the following criteria: The applicant should be a professional insurance agency in Hong Kong or Macau; Operating in insurance agency business for over 10 years The average annual business revenues for the past 3 years before application should not be less than HK$500,000 and the total assets as at the end of the year before application should not be less than HK$500,000; Within 3 years before application, there is no serious misconduct and record of disciplinary action. The insurance agency company set up in the Mainland is not permitted to sell insurance policies there on behalf of Hong Kong insurers. The insurance agency company should only provide insurance agency services for the Mainland insurers. (Source: HYPERLINK “http://www.tid.gov.hk ” www.tid.gov.hk and The Notice is available in CIRC’s website www.circ.gov . cn/Porta10/InfoModule_394/61056.htm) 18 Feature