Lawyer Monthly - June 2022

EXPERT INSIGHT 74 WWW.LAWYER-MONTHLY.COM | JUN 2022 This said, the creation of the IA and the enactment of the IO in Hong Kong is very recent (in relative terms) and sweeping changes of this nature inevitably create a degree of upheaval for those involved. Insurers’ legal teams have had to familiarise themselves with the new legislation and ensure that their existing policies and procedures comply. Aspects of their business which previously did not warrant scrutiny may do so now. And, of course, the legislation is new and untested, meaning all involved (including the IA) are still in the process of understanding its scope and limitations, where legislation cannot and will not cater for every situation. We are regularly called upon to support our clients as the industry continues to navigate the legislation and understand the extent of its requirements and parameters. What may be the consequences of an organisation failing to comply with regulatory requirements, and how can your firm help prevent this outcome? Following an investigation, the IA has a wide range of disciplinary actions available to it if an authorised insurer is found guilty of misconduct or an individual is found to be not fit and proper to hold a directorship or controller position. Penalties range from a reprimand (either private or public) to more serious sanctions including a fine of up to HK $10 million (or three times the profit gained or loss avoided as a result of the infringement) or suspension/revocation of the insurer’s or individual’s licence to carry on insurance business. Before the IA takes action, the authorised insurer or individual can make written or oral representations and can appeal the IA’s decisions to the IAT. In the last 12 months, the IA has taken disciplinary action against insurers and brokers arising from a range of failings. However, the majority of cases have been matters of serious misconduct e.g. rogue individuals acting alone and for personal gain. The IA has likely been purposefully selective about the cases it has pursued, seeking to make an example of the worst offenders. Misconduct is obviously not something that we or our clients can prevent absolutely. However, we can support our insurer and broker clients to ensure they have the correct infrastructure in place to help catch individual behaviours that fall foul of the rules. For other types of (unintentional) breaches, we can support them in developing policies and procedures that reflect the requirements of the regulations to ensure that all involved are aware of their respective obligations and are operating in compliance with the rules. If breaches occur, we can advise on how to manage and respond to the enquiry and the benefits of early and voluntary cooperation. What are some of the most complex cases your firm has worked on in recent times? We have always maintained a wide practice area. However, certain local and global events over the last few years have generated some highly complex and sensitive instructions which have been a privilege to work on. The Hong Kong protests, which took place throughout 2019, are a key example. We provided specialist support to a number of key insurers in respect of a ream of large property damage and business interruption claims after a range of corporations and business suffered significant losses during the protests. These claims required us to consider (among other things) the application and interpretation of terrorism exclusions, a policy provision which is rarely engaged. In circumstances where the protests were the first of its kind in Hong Kong, and given the lack of legal authority on the issues arising, we were able to provide highly specialised legal support and innovative commercial solutions to assist our insurer clients. Our work led us to team up with various esteemed London insurance QCs, which demonstrates the magnitude and significance of these claims. In the cyber risks sphere, over the last two years we have advised on policy coverage in respect of some of the largest, most high-profile ransomware attacks affecting HK companies. We also act as the regional breach solution for a major leading international insurer. Our product, ReSecure, which is written into the insured’s cyber policy, includes a dedicated 24/7 hotline which an insured can call in the event of a data breach to obtain immediate crisis response. We provide breach coordination and legal advice, including as to data privacy issues, regulatory reporting and We have also seen a rising demand for crypto insurance. Financial market uncertainty has led to increased demand for crypto products. The creation of the IA and the enactment of the IO in Hong Kong is very recent (in relative terms) and sweeping changes of this nature inevitably create a degree of upheaval for those involved.

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