Hong Kong Regulations

MANDATORY PROVIDENT FUND SCHEMES (GENERAL) REGULATION - SECT 8

What is adequate insurance for the purposes of registered schemes?

(Past version on 24/07/1998).

(1) For the purposes of the Ordinance, an approved trustee has
adequate insurance for the registered schemes administered by the trustee if
there are in force 1 or more insurance policies that-

   (a)  are obtained from 1 or more eligible insurers; and

   (b)  cover the total managed assets of the approved trustee and do not deal
        with any matter other than the assets of the schemes concerned; and

   (c)  provide an insurance cover for not less than the amount specified in
        subsection (4); and

   (d)  provide for indemnity in respect of the prescribed risks set out in
        subsection (5) that are attributable to the administration of the
        schemes by the trustee or by any service provider of the scheme
        (excluding losses attributable to investing the funds of the scheme in
        the ordinary course of business); and

   (e)  specify a deductible amount that does not exceed the maximum amount
        determined under subsection (6); and

   (f)  are governed by the law of Hong Kong.

(2) For the purpose of subsection (1)(a), a person is an eligible insurer if
the person's business includes that of providing insurance and-

   (a)  the person is specified in section 6(1) of the Insurance 
        Companies Ordinance ( Cap 41); or

   (b)  the Authority is satisfied that the person is an insurer that is able
        to meet its liabilities.

(3) Before determining whether an insurer is able to meet its liabilities, the
Authority must-

   (a)  take into account the credit rating of the insurer as determined by an
        approved credit rating agency; and

   (b)  consult the Insurance Authority.

(4) For the purpose of subsection (1)(c), the amount of insurance cover is to
be obtained in respect of the total managed assets of an approved trustee as
follows-

   (a)  if the market value of the total managed assets is not more than
        $100000000-30 per cent of that value;

   (b)  if the market value of the total managed assets is more than
        $100000000 but not more than $300000000-$30000000 plus 20 per cent of
        that value that exceeds $100000000;

   (c)  if the market value of the total managed assets is more than
        $300000000 but not more than $500000000-$70000000 plus 15 per cent of
        that value that exceeds $300000000;

   (d)  if the market value of the total managed assets is more than
        $500000000 but not more than $1000000000-$100000000 plus 10 per cent
        of that value that exceeds $500000000;

   (e)  if the market value of the total managed assets is more than
        $1000000000 but not more than $5000000000-$150000000 plus 5 per cent
        of that value that exceeds $1000000000;

   (f)  if the market value of the total managed assets is more than
        $5000000000 but not more than $10000000000-$350000000 plus 3 per cent
        of that value that exceeds $5000000000;

   (g)  if the market value of the total managed assets is more than
        $10000000000-$500000000.

(5) For the purpose of subsection (1)(d), the prescribed risks are as follows-

   (a)  the risk of loss of scheme assets attributable to fraudulent, wrongful
        or negligent acts done or omitted to be done by-

        (i)    the approved trustee of the scheme; or

        (ii)   a service provider appointed or engaged for the purposes of
               that scheme; or

        (iii)  an employee or agent of the trustee or of the service provider;

   (b)  the risk of loss of scheme assets kept on the premises of the trustee
        or service providers or at a central securities depository;

   (c)  the risk of loss of scheme assets while they are being transported in
        the custody of the trustee or service providers, or of a
        central securities depository;

   (d)  the risk of loss of scheme assets arising from relying on a cheque or
        other negotiable instrument that is forged, fraudulently altered, lost
        or stolen;

   (e)  the risk of loss of scheme assets arising from the fraudulent use of a
        computer or from fraudulent instructions given for the transfer of
        those assets;

   (f)  the risk of loss of scheme assets arising from indemnifying the
        trustee in accordance with the governing rules of the scheme as
        permitted by law.

(6) For the purpose of subsection (1)(e), the maximum amount is to be
determined in respect of the total managed assets of an approved trustee as
follows-

   (a)  if the market value of the total managed assets is not more than
        $1000000-$100000;

   (b)  if the market value of the total managed assets is more than $1000000,
        the smaller of the following amounts-

        (i)    $500000;

        (ii)   an amount equal to 10 per cent of the market value of the
               scheme assets.

(7) For the purpose of this section-

   (a)  a reference to the total managed assets of an approved trustee is a
        reference to the aggregate of all scheme assets of all registered
        schemes administered by the trustee; and

   (b)  a reference to a deductible amount, in relation to a policy of
        insurance under which the insurer is liable for only the part of a
        claim that exceeds a specified amount, is a reference to that amount.

(8) (Repealed L.N. 223 of 2000)