Earlier this year, the Macau Legislative Assembly has discussed and generally approved a Law proposal for updating and revising Decree-Law 27/97/M of June 30th: the Macau Insurance Companies Ordinance (“MICO”). While the Macau Official Gazette is yet to publish this revising law in the next few months, no significant changes are expected, once it becomes in force.
by António Isóo de Azeredo and José J. Rodrigues
Applicable since September 1997, MICO has been effective in facing the challenges and rapid evolution of the Insurance sector for more than twenty years. However, the impressive development of the insurance activity in Macau justifies the need for updating the existing regulation, presenting a revised regime that will be in accordance with today’s market reality.
This MICO revising law imposes several changes and provides tools that enable the regulator and private local and foreign entities to thoroughly face the demands of the insurance sector as a whole. In overview, we emphasize some that bring a more significant impact.
Application requirements are extended for companies intending to incorporate a local entity, including matters such as groups’ structure, investments plans, solvency margin provisions, marketing models, and employment of staff plans. Additionally, reputation criteria of members of corporate bodies are to be reinforced and strengthened, averting from responsibilities of insurance activity those charged or found guilty of money laundering or terrorism financing crimes.
Conditions and requirements of risk management mechanisms, internal controls, AML, and CFT measures must be specified within the license and authorization application, to be filed before the Macau regulator.
On the other hand, minimum share capital required for locally incorporated life and non-life insurers is to be increased, as well as the funds allocated to branches of insurance companies incorporated overseas.
Furthermore, the requirements of technical provisions are improved. By demanding non-life insurance companies to put in place risk provisions based on solid actuarial principles, the respective coverage and guarantee are revised to ensure and comply with supervision requisites. The increase of solvency margin will also be required from these companies to provide for steady control.
This new law revising MICO will target not only insurance activity entities (in an extended interpretation) but also the powers and tasks of the Macau Regulator. The Macau Monetary Authority’s activity and supervision powers are to be updated, and the means of its implementation are to be provided in the revised MICO.
Professional secrecy requirements are imposed to members of the Regulator’s bodies and their staff, as well as to members of the corporate bodies of insurance and reinsurance companies, their employees, accountants, auditors, consultants, and attorneys, with respective exceptions and withdrawal criteria provided as well. Additionally, provisions related to means and terms of the recording of digital documents, and respective evidence value are updated to today’s demands.
Finally, the MICO revising law provides the terms within which Macau Insurance Companies and branches of insurance companies incorporated overseas must enforce and execute all necessary acts to comply with Macau Law. General terms are provided in 180 days, counted from the date the MICO revising law comes into force.
A specific deadline of eighteen months is granted for both Macau Insurance Companies and branches of insurance companies incorporated overseas to comply with the new share capital requirements and establishment funds, respectively.
While the MICO revising law provides adequate deadlines, Macau Insurance entities should bear in mind that updating their internal structure according to these legal changes and implementing the required measures derived from the revising law, which need to liaise with the Macau Regulator, would take time. Therefore, an appropriate and cautioned approach should be adopted, and we are here to assist you with it.
We will keep you updated on this particularly important matter so please stay tuned with C&C’s newsletter. Subscribe here.
|António Isóo de Azeredo
Senior Associate Lawyer
|José J. Rodrigues