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HKIA updates capital rules
The updated guidelines are effective 1 July.
The Hong Kong Insurance Authority’s (HKIA) new rules and regulations, including the Insurance (Valuation and Capital) Rules (Cap. 41R), will take effect on 1 July.
The authority is providing guidance on the following areas, which have been reviewed with the industry and incorporated into the latest technical specifications:
- Minimum requirements for stochastic simulation approach (rule 19): Rule 19(2) mandates that insurers use a stochastic simulation approach to calculate the time value of options and guarantees in insurance contracts with such features. The economic scenario generator used must meet the requirements in Appendix 1.
- Simplified approaches for the calculation of matching adjustment (rule 24): Rule 24(6) allows insurers facing practical difficulties in performing full matching adjustment calculations to use any or all of the simplified approaches approved by the IA, detailed in Appendix 2.
- Approval for using their own assessment approach for natural catastrophe risk (rule 67): Rule 67 requires insurers to determine their risk capital amount for natural catastrophe risk using a factor-based approach per rule 68 unless they have IA approval to use their own assessment (OA). Appendix 3 provides guidance on applying for such approval and details on the submission requirements for ongoing monitoring.
Further guidance and practical considerations will be provided in a forthcoming guideline, which will be consulted with the industry.
Additionally, the Guideline on Insurance (General Business) (Valuation) Rules (GL2) and the Guideline on the Reserve Provision for Class G of Long Term Business (GL7) will be repealed effective 1 July.