Insurance System And Supervision

1.      Local insurance system

 

1.1    Insurance authority and market players

 

In Macau the authority for the supervision, co-ordination and inspection of insurance activity rests with the Chief Executive, while the actual execution of these functions is carried out by AMCM through its Insurance Supervision Department.

 

The insurance industry is made up of 24 insurance companies, 11 of which are life companies and the remaining 13 are involved in non-life business. In terms of origin, 8 are local companies and the remaining 16 are branches of overseas companies, representing 6 countries and one Special Administrative Region of China (Hong Kong).

 

At the end of December 2007, the intermediary sector was made up of 2,697 insurance intermediaries, comprising 2,047 individual agents, 44 local corporate agents, 13 overseas corporate agents, 575 salesmen, 13 overseas brokers and 5 local brokers.

 

There are three associations representing the industry. The Macau Insurers' Association represents authorised insurance companies, both life and non‑life.  The Macau Insurance Agents and Brokers Association and the Federation of Macau Professional Insurance intermediaries represent, as the names suggest, the intermediary sector.

 

 

1.2    Regulatory norms

 

The Macau Insurance Ordinance, Decree-Law No. 27/97/M, of 30th June, regulates the business of insurance companies, while the Insurance Agents and Brokers Ordinance, Decree-Law No. 38/89/M, of 5th June, as amended by Administrative Regulation No. 27/2001, of 28th June, and Administrative Regulation No. 14/2003, of 6th May, regulates the insurance intermediary sector.

 

Only licensed insurance companies or insurance intermediaries are permitted to operate in Macau SAR. However, insurance companies authorised to carry on insurance business here may freely accept reinsurance contracts in the classes of insurance so authorised and also reinsure their contracts with entities authorised for such purposes, even if the said entities have not been formed or established in Macau SAR.

 

Under the Macau Insurance Ordinance, insurance companies can be licensed as:

 

·               A locally incorporated company;

·               A branch with head office overseas; and

·               A representative office.

 

While a locally incorporated company or a branch of a foreign insurance company can conduct insurance business in Macau SAR, a representative office of a foreign insurance company, on the other hand, is prohibited from transacting insurance business.

 

To enter the local insurance market, the application will have to meet the following capital and establishment fund requirements under the current legislation:

 

·               For an insurer incorporated in Macau SAR, the required capital is 30 million patacas to transact life insurance and 15 million patacas to transact non-life insurance;

 

·               For a reinsurer incorporated in Macau SAR, the required capital is 150 million patacas to transact life insurance and 100 million patacas to transact non-life insurance;

 

·               For a foreign insurer to establish a branch in Macau SAR, the required establishment fund is 7.5 million patacas to transact life business and 5 million patacas to transact non-life business. In addition, the share capital of the head office of such insurer should not be less that the minimum capital required for a domestic insurer, life or non-life, as the case may be;

 

·               There is no establishment fund requirement for a representative office of a foreign insurer or reinsurer. However, the share capital of the respective head office should not be less that the required capital for domestic insurer or reinsurer, as the case may be.

 

In addition to the share capital or establishment fund, insurers and reinsurers have to meet the following requirements to obtain the necessary licence:

 

·               Legal requirements, i.e., in particular, conformity of the form of business organisation adopted by the company, filing of bylaws and general terms and conditions of policies, insurance specialisation, etc.

 

·               Accounting requirements, i.e., filing of prior years accounts, business plan and budget for the first three years of activity and indication of financial resources;

 

·               Technical requirements, i.e., filing of technical bases for tarification and details of reinsurance programmes;

 

·               Managerial requirements, i.e., demonstration that officers are fit and proper and that the shareholders are of good repute.

 

Once authorised, insurance and reinsurance companies have to comply with various requirements of the Ordinance, such as:

 

·               Submission of quarterly and yearly accounts, namely trial balance, profit and loss accounts, balance sheet and other statistical information;

 

·               Setting up of technical reserves, namely mathematical reserves, unearned premium reserves and claims reserves. Life insurers and reinsurers need to submit annual valuation certificate on the adequacy of mathematical reserves duly signed by a qualified Actuary;

 

·               Guaranteeing of technical reserves with assets, according to the type and composition determined by AMCM by way of notices published in the Official Gazette;

 

·               Maintaining  a margin  of  solvency  as   laid   down  in   the  Ordinance. Non--admitted assets for the purpose of calculation of the margin of solvency is determined by AMCM by way of notices published in the Official Gazette;

 

·               Setting up of legal reserves by insurers and reinsurers incorporated in Macau;

 

·               Annual filing of details of qualified shareholding with AMCM by insurers incorporated in Macau SAR. Prior authorisation of AMCM is necessary for any acquisition of a qualified shareholding, i.e. a minimum of 10% of the share capital or of voting rights, or any increase of such shareholding in a proportion equal to or higher than 5% of the capital or of the voting rights. However, where prior authorisation is not obtained due to unavoidable circumstances, the respective acquisition or increase needs to be communicated to AMCM within a period of 30 days from the date of such acquisition or increase.

 

Regarding the insurance intermediary sector, the Insurance Agents and Brokers Ordinance also makes it compulsory for any person, individual of body corporate, wishing to conduct insurance intermediary business in Macau SAR to obtain the necessary licence.

 

Under this Ordinance, insurance intermediaries are classified into three categories:

 

·               Insurance Agents: Either individuals or corporate entities who act in the name of and on behalf of one or more insurers;

 

·               Insurance Salesmen: Individuals who are simultaneously employees of insurance companies, of corporate insurance agents, or of insurance brokers and who act, whilst carrying on the business of an intermediary, in the name of and on behalf of any one of the said entities.

 

·               Insurance Brokers: corporate entities, formed with the exclusive object of carrying on the business of an insurance intermediary, who act in the name of and on behalf of the insureds.

 

In addition to the classification of insurance intermediaries, the Ordinance sets out the respective authorisation procedures, their rights and obligations, the supervisory powers of AMCM, the sanctions applicable in case of non-compliance and the powers of intervention.

 

1.3    Compulsory Insurance

 

Certain types of insurance covers are made compulsory in various countries and territories depending on the extent of social benefit derived in terms of protecting the population in general against insurable risks.

 

In Macau SAR six compulsory insurance coverages have been regulated with corresponding uniform policy wordings and tariff rates. The rate of commission is also regulated by AMCM by way of notices published in the Official Gazette in respect of the following compulsory insurances:

 

·               Compulsory Motor Vehicle (Third Party Risks) Insurance:

 

·               Decree-Law No. 57/94/M, of 28th November – establishes the compulsory Motor Vehicle (Third Party Risks) Insurance;

 

·               Executive Order No. 248/94/M, of 28th November - sets out the amount payable to the Motor Vehicle & Marine Guarantee Fund;

 

·               Executive Order No. 249/94/M, of 28th November - defines the General Conditions and Schedules of the Uniform Motor Vehicle Insurance Policy;

 

·               Executive Order No. 250/94/M, of 28th November - establishes the corresponding Premium Tariff;

 

·               Notice No. 005/95/AMCM, of 17th May 1995 - lays down the procedures to be adopted in case insurers refuse to accept the compulsory Motor Vehicle (Third Party Risks) Insurance.

 

·               Compulsory Employees' Compensation Insurance:

 

·               Decree-Law No. 40/95/M, of 14th August – establishes the compulsory Employees' Compensation Insurance;

 

·               Executive Order No. 236/95/M, of 14th August – establishes the Premium Tariff;

 

·               Executive Order No. 237/95/M, of 14th August - sets out the General Conditions and Schedule of the Uniform Employees' Compensation Insurance Policy;

 

·               Notice No. 006/96/AMCM, of 24th April - sets out the procedures to be adopted in case insurers refuse to accept the insurance proposal;

 

·               Law No. 12/2001, of 13th August – amends paragraph 1 of Article 7 of Decree-Law No. 40/95/M, of 14th August;

 

·               Executive Order No. 32/2001, of 13th August – alters the wording of paragraph 2 of Article 5 of the Uniform Policy;

 

·               Executive Order No. 48/2006, of 16th November - sets out the new limits of indemnity under various articles of Decree-Law No. 40/95/M, of 14th August and revokes the Executive Order No. 94/99/M, of 29th March;

 

·               Executive Order No. 49/2006, of 16th November - states that the premiums calculated under the terms of the tariff in force shall be increased by 4.0% and revokes the Executive Order No. 95/99/M, of 29th March.

 

·               Law No. 6/2007, of 11th December - alters the wording of paragraph 4 of Article 28 of Decree-Law No. 40/95/M, of 14th August;

 

·               Executive Order No. 48/2007, of 14th December - sets out the new limits of indemnity under paragraph 2 of Article 47 and paragraph 4 of Article 50 of Decree-Law No. 40/95/M, of 14th August and revokes the Executive Order No. 48/2006, of 16th November, in the part concerning the limits established under paragraph 2 of Article 47 and paragraph 4 of Article 50 of the said Executive Order;

 

·               Executive Order No. 49/2007, of 14th December - states that the premiums calculated under the terms of the tariff in force shall be increased by 5.0% and revokes the Executive Order No. 49/2006, of 16th November.

 

·               Compulsory Professional Liability Insurance for Travel Agents:

 

·               Decree-Law No. 25/93/M, of 31st May – establishes the compulsory Professional Liability Insurance for Travel Agents;

 

·               Executive Order No. 263/99/M, of 14th June – defines the General Conditions and Schedule of the Uniform Policy;

 

·               Executive Order No. 265/99/M, of 14th June – establishes the Premium Tariff.

 

·               Compulsory Public Liability Insurance Relating to the Fixing of Propaganda and Publicity Material:

 

·               Decree-Law No. 38/96/M, of 15th July - establishes the minimum limits for Public Liability Insurance Relating to the Fixing of Propaganda and Publicity Material;

 

·               Executive Order No. 168/96/M, of 15th July – establishes the Premium Tariff;

 

·               Executive Order No. 169/96/M, of 15th July – defines the Terms and Conditions of the Uniform Policy.

 

·               Compulsory Third Party Liability Insurance for Pleasure Vessels:

 

·               Decree-Law No. 104/99/M, of 13th December – establishes the compulsory Third Party Liability Insurance for Pleasure Vessels;

 

·               Administrative Regulation No. 24/2003, of 10th July – defines the General Conditions and Schedule of the Uniform Policy;

 

·               Administrative Regulation No. 3/2004, of 14th January – establishes the Premium Tariff.

 

 

·               Compulsory Professional Liability Insurance for Lawyers

 

·               Administrative Regulation No. 40/2003, of 4th December – defines the General Conditions and Schedule of the Uniform Policy;

 

·               Administrative Regulation No. 41/2003, of 4th December – establishes the Premium Tariff.

 

 

1.4       Voluntary Retirement Schemes

 

·               Private Pension Funds:

 

·               Decree-Law No. 6/99/M, of 8th February – establishes the Legal Framework of Private Pension Funds;

 

·               Law No. 10/2001, of 2nd July - amends the Legal Framework of Private Pension Funds;

 

·               Notice No. 008/2000/AMCM, of 29th November - sets out the conditions to be met by actuaries of closed pension funds;

 

·               Notice No. 009/2000/AMCM, of 29th November – sets out the procedure for individual or collective membership of open pension funds;

 

·               Notice No. 014/2000/AMCM, of 29th November – establishes the rules for financial, technical and actuarial management of pension funds;

 

·               Notice No. 005/2001/AMCM, of 28th March – sets out the procedure for the certification of appointed actuary of closed pension funds;

 

·               Notice No. 010/2001/AMCM, of 30th August – establishes the rules for admission of depositories of pension funds;

 

·               Notice No. 014/2001/AMCM, of 28th October – establishes the rules for the utilization of derivatives in pension funds;

 

·               Notice No. 010/2005/AMCM, of 4th August – determines the composition and valuation of assets constituting the patrimony of pension funds.