Hong Kong Regulations

INSURANCE COMPANIES (GENERAL BUSINESS) (VALUATION) REGULATION - SECT 6

Shares in other insurers

(1) Where an insurer is the holding company of another company whose principal
business is insurance business, the value of the holding of the shares held by
the insurer in such a subsidiary must be determined in accordance with the
following provisions of this section and not in accordance with section 4 or
7.

(2) Subject to subsections (3) and (4), the value of the holding of the shares
held by the insurer in such a subsidiary must be not greater than that part of
the net tangible assets of the subsidiary, which would be payable in respect
of the shares in the subsidiary held by the insurer if the subsidiary were in
liquidation and that net tangible assets were the amount distributable to the
shareholders in the winding up.

(3) The value of the assets and liabilities of the subsidiary must be
determined in accordance with any regulation (including this Regulation) made
under section 59(1)(a) of the Ordinance for the valuation of assets and
liabilities of an insurer carrying on- (29 of 1997 s. 16)

   (a)  general business, if the subsidiary carries on general business; or

   (b)  long term business, if the subsidiary carries on long term business,
        as if the regulation applied to the subsidiary, and for the avoidance
        of doubt, it is declared that subsection (2) does not require the
        assets of a subsidiary to be valued on the basis that the subsidiary
        were in liquidation.

(4) The liabilities of the subsidiary are deemed for the purpose of this
section to include the relevant amount in the case of the subsidiary.

(5) For each subsidiary which has the value of its shareholding held by the
insurer determined under this section, the name and place of incorporation of
the subsidiary and the proportion of the nominal value of the issued shares of
each class of shares held by the insurer must be disclosed.

(6) Where the Insurance Authority is satisfied that it is impracticable for an
insurer to value its shares in its subsidiary in accordance with this section
(other than this subsection), the insurer may, with the approval of the
Insurance Authority, value its shares in the subsidiary at up to 75% of the
attributable share value of the shares.

(7) Subject to subsection (9), for the purpose of subsection (6), the
attributable share value of a share in a subsidiary is that part of the
surplus of the net tangible assets of the subsidiary as disclosed in its most
recent audited accounts audited by an auditor qualified to be appointed under
section 15 of the Ordinance (as if that section applied to the subsidiary)
over the relevant amount in the case of the subsidiary, which would be payable
in respect of the share in the subsidiary held by the insurer if the
subsidiary were in liquidation and that surplus were the amount distributable
to the shareholders in the winding up.

(8) The "relevant amount" (有關數額) referred to in this section-

   (a)  in the case of a subsidiary carrying on general business only, is the
        relevant amount as determined in accordance with section 10(1) of the
        Ordinance as if that section applied to the subsidiary;

   (b)  in the case of a subsidiary carrying on long term business only, is an
        amount equal to the greatest of the following amounts-

        (i)    the relevant amount specified in section 10(2) of the Ordinance
               as if that section applied to the subsidiary;

        (ii)   the amount prescribed by section 11 of the Insurance Companies 
               (Margin of Solvency) Regulation ( Cap 41 sub. leg.) as if that
               section applied to the subsidiary; or

        (iii)  the amount prescribed by or determined in accordance with
               regulations made under section 59(1)(aa) of the Ordinance for
               the purposes of section 8(3)(a)(ii)(B) and (iii)(B) of the
               Ordinance as if the regulations applied to the subsidiary,
               reduced by the future profits and hidden reserves of the
               subsidiary to the extent allowed by the Insurance Authority
               under section 35AA(3) of the Ordinance as if that section
               applied to the subsidiary; (29 of 1997 s. 16)

   (c)  in the case of a subsidiary carrying on both general business and long
        term business, is an amount equal to the aggregate of the 2 amounts
        referred to in paragraphs (a) and (b) having regard, respectively, to
        its general business and long term business.

(9) For the avoidance of doubt, it is declared that subsection (7) does not
require the assets of a subsidiary to be valued on the basis that the
subsidiary were in liquidation, and the assets may be valued on the basis that
the subsidiary is a going concern, or on any other basis which, in the opinion
of the Insurance Authority, is appropriate. (Enacted 1995)

"relevant amount" (有關數額)