INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION
- CHAPTER 41F

INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - LONG TITLE  
Empowering section VerDate:30/06/1997



(Cap 41, section 59)

[27 October 1995]  L.N. 485 of 1995

(L.N. 328 of 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 1
(Omitted as spent) VerDate:30/06/1997



(Omitted as spent)
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 2
Interpretation VerDate:30/06/1997



In this Regulation, unless the context otherwise requires-
"deposit back arrangement" (回存安排), in relation to any contract of 
reinsurance, means an arrangement whereby an amount is deposited by the 
reinsurer with the cedant;
"first calculation" (第一計算法) and "second calculation" (第二計算法) have the 
meaning given in section 4(1) to (3);
"margin of solvency" (償付準備金) means the excess of the value of an insurer's 
assets over the amount of its liabilities;
"mathematical reserves" (數理儲備金) means the provision made by an insurer to 
cover liabilities (excluding liabilities which have fallen due and 
liabilities arising from deposit back arrangements) arising under or in 
connection with contracts for long term business;
"pure reinsurer" (純再保險人) means an insurer whose insurance business is 
restricted to reinsurance;
"required margin of solvency" (規定償付準備金) means a margin of solvency the 
amount of which shall constitute the amount to be prescribed or determined 
for the purposes of section 8(3)(a)(ii)(B) and (iii)(B) of the Ordinance.
(Enacted 1995)
"deposit back arrangement" (回存安排)
"first calculation" (第一計算法) and "second calculation" (第二計算法)
"margin of solvency" (償付準備金)
"mathematical reserves" (數理儲備金)
"pure reinsurer" (純再保險人)
"required margin of solvency" (規定償付準備金)


INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 3
Determination of margins of solvency VerDate:30/06/1997




(1)	Where an insurer carries on long term business and owing to the 
nature of that business more than one margin of solvency is produced in 
respect of that business by the operation of this Regulation, the margins 
in question shall be aggregated as regards the insurer in order to arrive 
at the insurer's required margin of solvency for long term business.

(2)	The amount of liabilities of an insurer arising under or in 
connection with contracts for long term business for the purpose of 
calculating the required margin of solvency shall be determined in 
accordance with the Insurance Companies (Determination of Long Term 
Liabilities) Regulation (Cap 41 sub. leg. E).
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 4
Long term classes A and B VerDate:30/06/1997




(1)	For long term business of class A or B, the required margin of 
solvency shall be determined by taking the aggregate of the results 
arrived at by applying the calculation described in subsection (2) ("the 
first calculation") and the calculation described in subsections (3), (4), 

(5), (6) and (7) ("the second calculation").

(2)	For the first calculation-

        (a)	there shall be taken a sum equal to 4% of the mathematical 
reserves for direct business and reinsurance acceptances without any 
deduction for reinsurance cessions;

        (b)	the amount of the mathematical reserves at the end of the last 
preceding financial year after the deduction of reinsurance cessions shall 
be expressed as a percentage of the amount of such mathematical reserves 
before any such deduction; and

        (c)	the sum mentioned in paragraph (a) shall be multiplied-

        (i)	where the percentage arrived at under paragraph (b) is greater 
than 85% (or, in the case of a pure reinsurer, 50%), by that greater 
percentage; and

        (ii)	in any other case, by 85% (or, in the case of a pure 
reinsurer, 50%).

(3)	For the second calculation-

        (a)	there shall be taken, subject to subsections (4), (5), (6) and 

(7), a sum equal to 0.3% of the capital at risk for contracts on which the 
capital at risk is not a negative figure;

        (b)	the amount of the capital at risk at the end of the last 
preceding financial year for contracts on which the capital at risk is not 
a negative figure, after the deduction of reinsurance cessions, shall be 
expressed as a percentage of the amount of that capital at risk before any 
such deduction; and

        (c)	the sum arrived at under paragraph (a) shall be multiplied-

        (i)	where the percentage arrived at under paragraph (b) is greater 
than 50%, by that greater percentage; and

        (ii)	in any other case, by 50%.

(4) Subject to subsections (5), (6) and (7), the percentage to be taken 
for the purposes of subsection (3)(a) shall be-

        (a)	zero for the financial year immediately preceding 1 January 
1996; and

        (b)	0.1% for the financial year immediately preceding 1 January 
1997; and

        (c)	0.2% for the financial year immediately preceding 1 January 
1998.

(5)	Where, in a case other than that of a pure reinsurer, a 
contract provides for benefits payable only on death within a specified 
period and is valid for a period of not more than 3 years from the date 
when the contract was first made, the percentage to be taken for the 
purposes of subsection (3)(a) shall be 0.1%; and where the period of 
validity from that date is more than 3 years but not more than 5 years, 
the percentage to be so taken shall be 0.15%.

(6)	For the purposes of subsection (5), the period of validity of 
the contract evidencing a group policy is the period from the date when 
the premium rates under the contract were last reviewed for which the 
premium rates are guaranteed.

(7)	In the case of pure reinsurers, the percentage to be taken for 
the purposes of subsection (3)(a) shall be 0.1%.

(8)	For the purposes of the second calculation, the capital at risk 
is-

        (a)	in any case in which an amount is payable in consequence of 
death other than a case falling within paragraph (b), the amount payable 
on death; and

        (b)	in any case in which the benefit under the contract in question 
consists of the making, in consequence of death, of the payment of an 
annuity, payment of a sum by instalments or any other kind of periodic 
payments, the present value of that benefit,
less in either case the mathematical reserves in respect of the relevant 
contracts.

(9)	When the amount of the mathematical reserves referred to in 
subsection (2)(a), or the amount of the capital at risk referred to in 
subsection (3)(a), is to be calculated for the purposes of determining the 
required margin of solvency, the day as on which that amount is calculated 
shall be the same as that as on which the margin of solvency is 
determined; and the mathematical reserves referred to in subsection (8) 
shall also be calculated as on that day when the capital at risk in 
question is that referred to in subsection (3)(a), but shall be calculated 
as at the end of the last preceding financial year when the capital at 
risk in question is that referred to in subsection (3)(b).
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 5
Long term class C VerDate:30/06/1997




(1)	For long term business of class C, the required margin of 
solvency shall be determined in accordance with subsections (2) to (5).

(2)	In so far as an insurer bears an investment risk, the first 
calculation shall be applied.

(3)	In so far as-

        (a)	an insurer bears no investment risk;

        (b)	the total expired and unexpired term of the relevant contract 
exceeds 5 years; and

        (c)	the allocation to cover management expenses in the relevant 
contract has a fixed upper limit which is effective as a limit for a 
period exceeding 5 years,
the first calculation shall be applied, but as if section 4(2)(a) 
contained a reference to 1% instead of 4%.

(4)	If neither subsection (2) nor (3) applies, then, subject to 
subsection (5), the required margin of solvency is zero.

(5)	Where an insurer covers a death risk, a sum arrived at by 
applying the second calculation (section 4(5) and (6) being disregarded) 
shall be added to any required margin of solvency, including a required 
margin of solvency of zero, arrived at under subsection (2), (3) or (4).
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 6
Long term classes D and F VerDate:30/06/1997



For long term business of classes D and F, the required margin of solvency 
shall be determined by applying the first calculation.
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 7
Long term class E VerDate:30/06/1997



For long term business of class E, the required margin of solvency shall 
be equal to 1% of the assets of the relevant tontine.
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 8
Long term class I VerDate:30/06/1997



For long term business of class I, the required margin of solvency shall 
be equal to the aggregate of the required margins of solvency that would 
have applied if the business had not been retirement scheme business and 
had accordingly been classified, as appropriate, under the relevant 
classes of long term business in Part 2 of the First Schedule to the 
Ordinance instead of under class I.
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 9
Additional business of the nature of general business VerDate:30/06/1997




(1)	For additional business regarded as long term business by 
virtue of paragraph 3 of Part 1 of the First Schedule to the Ordinance, 
the required margin of solvency shall be the amount applicable to the 
insurer according to the following Table-  

TABLE

Case	Amount Applicable
1. The relevant premium income relating to the additional business of the 
insurer in its last preceding financial year, or the relevant claims 
outstanding of the insurer as at the end of its last preceding financial 
year relating to the additional business, whichever is the greater, did 
not exceed $200 million or its equivalent.	One-fifth of the said income in that year, 
or one-fifth of the said claims outstanding as at the end of that year, as 
the case may be.
2. The said income in that year, or the said claims outstanding as at the 
end of that year, whichever is the greater, exceeded $200 million or its 
equivalent.	The aggregate of $40 million and-
	(a) one-tenth of the amount by which the said income in that year exceeded 
$200 million; or
	(b) one-tenth of the amount by which the said claims outstanding as at the 
end of that year exceeded $200 million,
	as the case may be, or its equivalent.  (35 of 1996 s. 35)

In the case where the additional business is not ancillary to the 
principal risk of long term business, the amount applicable shall not be 
less than $10 million or its equivalent.  (35 of 1996 s. 35)

(2) In this section, "relevant premium income" (有關保費收入) has the meaning as 
it has in section 10(4) of the Ordinance.

(3) In this section, "relevant claims outstanding" (有關未決申索) has the same 
meaning as in section 10(4)(d) of the Ordinance.  (35 of 1996 s. 35)
(Enacted 1995)
"relevant premium income" (有關保費收入)
"relevant claims outstanding" (有關未決申索)


INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 10
Prescribed levels of solvency margin VerDate:30/06/1997




(1)	For the purposes of section 35AA(1) of the Ordinance, the 
prescribed amount shall be the required margin of solvency or $2000000, 
whichever is the greater.

(2)	For the purposes of section 35AA(2) of the Ordinance, the 
prescribed amount shall be the aggregate of the following amounts-

        (a)	the required margin of solvency as determined by section 9; and

        (b)	$2000000 or one-third of the required margin of solvency as 
determined by sections 4 to 8, whichever is the greater.
(Enacted 1995)



INSURANCE COMPANIES (MARGIN OF SOLVENCY) REGULATION - SECT 11
Maintenance of funds VerDate:30/06/1997



For the purposes of sections 22(3)(b)(ii) and 23(2)(b)(ii) of the 
Ordinance, the amount required to be held in the funds shall be one-sixth 
of the required margin of solvency.
(Enacted 1995)