IIQE Paper 1 Principles and Practice of Insurance Examination Quiz 07 Advanced

The Insurance Authority (IA) has issued Guideline 3 (GL3) under the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO) and the Insurance Ordinance (IO). This guideline provides relevant statutory and regulatory requirements and standards for insurers to comply with AML/CFT regulations. GL3 serves as a guide for insurers and their staff, including licensed agents and brokers, to understand and implement policies against money laundering and terrorist financing. It offers a general background on ML/TF and practical guidance for developing internal controls. While GL3 is admissible in court proceedings under the AMLO, failure to comply with it does not automatically lead to legal proceedings. However, non-compliance can reflect negatively on the fitness and properness of an insurer’s directors and controllers, or a licensed agent’s fitness and properness, potentially leading to disciplinary actions. A risk-based approach (RBA) is central to effective AML/CFT implementation, requiring insurers to identify, assess, and mitigate ML/TF risks. This includes conducting an Institutional ML/TF Risk Assessment (IRA) every two years or upon trigger events, considering factors like customer base, geographical risks, products/services, and delivery channels. Customer Risk Assessment (CRA) is also crucial to determine the extent of CDD measures based on the ML/TF risks associated with a business relationship.

To be eligible for licensing as an individual insurance agent under the Insurance Ordinance (IO), an applicant must meet specific criteria. One key requirement is that the applicant must be appointed as an agent by at least one authorized insurer. Furthermore, the applicant cannot simultaneously hold certain other licenses, such as an individual insurance agent license, an insurance broker company license, a technical representative (agent) license, or a technical representative (broker) license. They also cannot be in the process of applying for any of these licenses. This ensures that individuals focus on their role as an agent and avoid conflicts of interest or overlapping responsibilities. The ‘fit and proper’ criteria are also essential, focusing on the applicant’s competence, integrity, and financial soundness. The Insurance Authority (IA) assesses these factors to ensure that only suitable individuals are licensed to protect the interests of policyholders and maintain the integrity of the insurance market. The responsible officer of a licensed insurance agency or broker company plays a crucial role in supervising regulated activities and ensuring compliance with conduct requirements under section 90 of the IO.

Statement I is correct. According to IIQE Paper 1 syllabus, an act or omission related to regulated activity that is prejudicial to policyholders, potential policyholders, or the public interest constitutes misconduct.

Statement II is correct. A responsible officer of a licensed insurance agency or broker company can be deemed guilty of misconduct if the company’s misconduct occurred with their consent, connivance, or due to their neglect.

Statement III is incorrect. While the IA considers past conduct when assessing fitness and properness, the statement is incomplete. The IA considers present OR past conduct.

Statement IV is incorrect. The IA may exercise powers under section 81 if a responsible officer is convicted of an offense that impugns their fitness and properness. The statement is incomplete. The IA may exercise powers under section 81 if a responsible officer is convicted of an offense in Hong Kong or elsewhere which in the opinion of the IA impugns the fitness and properness of the person to remain as a responsible officer.

Therefore, statements I and II are correct.

I. Correct. According to the statutory definition, a material fact is any circumstance that would influence a prudent insurer’s judgment in setting the premium or deciding whether to accept the risk. This aligns with the principle of utmost good faith, requiring full and honest disclosure.
II. Incorrect. While the duty of utmost good faith revives at renewal, it does not revive simply because a life policy is approaching its anniversary date. The anniversary date itself doesn’t trigger a new assessment of risk.
III. Correct. If alterations are requested during the policy’s term, the duty of utmost good faith applies specifically to those changes. The insured must disclose all material facts relevant to the altered risk.
IV. Incorrect. Facts that diminish the risk do not need to be disclosed in the absence of enquiry. The example given in the text is that of a proposer for commercial fire insurance not mentioning the fact that his premises were protected by an automatic sprinkler system. This omission does not breach utmost good faith, as the fact (although very relevant) actually indicates a lower risk.

Therefore, statements I and III are correct.

Statement I is correct. According to the guidelines issued by the Privacy Commissioner, a licensed insurance agent should adhere to the record-keeping requirements of their appointing insurer or agency and submit records as soon as reasonably practicable.

Statement II is correct. Before an insurance policy application is signed or completed, the agent must inform the client of their right to cancel the policy during the cooling-off period and the procedure to exercise this right.

Statement III is correct. If the agent is responsible for delivering the policy, they should do so promptly and keep a record of the delivery date to allow the client sufficient time to review the policy before the cooling-off period expires.

Statement IV is incorrect. While competence is crucial, the guidelines specify that agents should possess appropriate levels of professional knowledge and experience and only conduct regulated activities within their competence. There is no specific mention of a minimum number of years of experience required.

Therefore, statements I, II, and III are correct.

Statement I is correct. Actual authority arises from the principal’s explicit or implicit consent for the agent to act on their behalf. This is a fundamental aspect of agency law.

Statement II is incorrect. Apparent authority is based on the principal’s communication to third parties, not the agent’s internal understanding. It focuses on how the principal’s actions would lead a reasonable third party to believe the agent has authority.

Statement III is correct. Authority of necessity arises in emergency situations where someone acts on behalf of another to protect their interests when communication is impossible. This is a recognized exception to the usual requirements for agency.

Statement IV is incorrect. Agency by estoppel arises when a principal’s actions lead a third party to believe someone is their agent, even if they are not. The principal is then prevented from denying the agency relationship to protect the third party who relied on the representation. The agent’s actions bind the principal, but it doesn’t necessarily create a full agency relationship unless ratified.

Therefore, statements I and III are correct.

Statement I is correct. According to Section 68(1) of the Insurance Ordinance (IO), an authorized insurer is vicariously liable for the actions of its appointed insurance agents when dealing with clients regarding insurance contracts, regardless of whether the agent’s actions fall within their authorized scope.

Statement II is incorrect. While Section 68 addresses vicarious liability, it also provides conditions under which an insurer is NOT liable. One such condition is if the agent disclosed that the act was outside their authority before the client relied on it.

Statement III is correct. The Insurance Ordinance (IO) stipulates that each licensed insurance agency and licensed insurance broker company must have at least one responsible officer, and these responsible officers must be licensed technical representatives (agent) or licensed technical representatives (broker), as applicable.

Statement IV is incorrect. The Insurance Ordinance (IO) provides transitional arrangements for deemed licensees, allowing them to be considered licensed by the IA for three years to ensure a smooth transition from the old to the new regime. The IA invites deemed licensees to apply for formal licenses during this period.

According to the Insurance Agents Code, a licensed insurance agent must provide specific information to the client before or as soon as reasonably practicable after commencing any regulated activity. This information includes the agent’s license type (individual insurance agent license, insurance agency license, or technical representative (agent) license), the name of the appointing insurer or agency, and, if applicable, the name of the appointing insurer of the technical representative’s appointing agency. Furthermore, if an agent or agency represents multiple insurers, they must clearly identify which insurer they represent for each transaction. The agent should also explain the key features of the insurance product, including the insurer’s name, major policy terms, premium level and payment period, and any applicable fees and charges. Finally, the agent must explain the principle of utmost good faith and the consequences of non-disclosure or incorrect information. Business cards (including digital ones) must display the agent’s name as on their HKID or passport, license number, license type, and the name of their appointing insurer or agency.

Statement I is correct. The IA (Insurance Authority) can impose restrictions on an insurer’s premium income if it’s growing too rapidly, potentially leading to difficulties in meeting future liabilities. This is a measure to ensure the insurer’s financial stability and protect policyholders.

Statement II is correct. The IA can restrict the types and locations of an insurer’s investments. This is to manage risk and ensure that the insurer’s assets are secure and liquid enough to meet its obligations.

Statement III is incorrect. While the Code of Conduct for Insurers, implemented by the HKFI, aims to set standards for good insurance practice, it applies to individual policyholders resident in Hong Kong, insured in their private capacity only, not to all policyholders.

Statement IV is incorrect. The Code of Conduct for Insurers focuses on underwriting, claims, product understanding, customer rights, and the industry’s public image. It does not directly address the appointment of a manager by the IA.

Therefore, statements I and II are correct.

When a licensed insurance agent has outside business interests, conflicts can arise. The agent must prioritize the client’s interests above their own. If a conflict is unavoidable, it must be disclosed to the client promptly. General Principle 8 emphasizes the need for safeguards to protect client assets. Agents should only handle premium payments within their authorized scope and must follow the insurer’s or agency’s requirements. Premiums received must be safeguarded and properly recorded, and not mixed with the agent’s personal funds. Cash payments should only be accepted under specific conditions. Licensed insurance agencies must have controls and procedures to ensure compliance with the Agents’ Code, including proper handling of complaints, record-keeping, and reporting of incidents to the IA. The agency’s governance structure should ensure fair treatment of clients, with clear roles and responsibilities for senior management.

The question explores the concept of ‘apparent authority’ in agency law, a crucial aspect of the IIQE Paper 1 syllabus. Apparent authority arises when a principal, through their actions or statements, leads a third party to reasonably believe that an agent has the authority to act on their behalf, even if the agent lacks actual authority.

* **Option I:** This statement accurately describes apparent authority. The principal’s communication to a third party creates the impression of authority, binding the principal.
* **Option II:** This statement is incorrect. Apparent authority focuses on the principal’s communication to the third party, not the agent’s communication to the principal. Actual authority, on the other hand, involves communication between the principal and the agent.
* **Option III:** This statement is also correct. Even if the agent’s actions are unauthorized, the principal can still be bound if apparent authority is established. This protects third parties who reasonably rely on the principal’s representations.

Therefore, statements I and III are correct.

An agent’s authority is the extent to which their actions bind the principal. Actual authority arises from the principal’s direct consent to the agent, either explicitly (express actual authority) or implicitly through conduct or past dealings (implied actual authority). Apparent authority stems from the principal’s representations to third parties, leading them to reasonably believe the agent has authority, even if they don’t in reality. Authority of necessity arises in emergency situations where someone acts on behalf of another to protect their interests when communication is impossible. Agency by estoppel occurs when a person’s words or actions lead a third party to believe someone is their agent, preventing them from later denying that authority. The duties of an agent to their principal include obedience to lawful instructions, personal performance (not delegating without permission), exercising due care and skill, maintaining loyalty and good faith, and accountability for all received assets and records.

Insurance intermediaries, whether agents or brokers, owe fundamental duties to policyholders. These include acting without fraud, behaving fairly and reasonably, avoiding unfair advantage, and refraining from undue influence. All actions must be legal, adhering to both the letter and spirit of the law. Insurance brokers, acting as agents of the policyholder, must provide impartial advice with the client’s interests paramount and are considered experts, potentially leading to professional negligence claims if they fail to exercise reasonable care. Insurance agents, primarily representing the insurer, still have legal and ethical obligations but are generally held to a lower standard of expertise, affecting their professional liability. Therefore, understanding the distinct roles and responsibilities of agents and brokers is crucial in determining their duties to policyholders.

Statement I is correct because insurance brokers typically act as agents of the policyholder, owing them fiduciary duties.
Statement II is correct because insurance agents primarily represent the insurer, not the policyholder.
Statement III is correct because both insurance agents and brokers must comply with the Insurance Ordinance (IO) and related regulations issued by the Insurance Authority (IA).

Statements I, II, and III are correct.

Statement I is correct. Individual licensees are required to report their Qualified CPD Activities to the IA using a CPD Declaration Form within 2 months after the assessment period ends, as per the Insurance Authority’s guidelines.

Statement II is incorrect. While individual licensees must inform their principals of the Qualified CPD Activities reported to the IA, the deadline for informing the principal is the same as the deadline for reporting to the IA, which is 2 months after the assessment period, not 3 months.

Statement III is correct. Individual licensees must retain documentary evidence of their attendance or completion of Qualified CPD Activities for a minimum of 3 years after the expiration of the relevant Assessment Period, as required by the IA for compliance checks.

Statement IV is incorrect. Excess CPD hours cannot be carried forward to subsequent Assessment Periods. This is to ensure continuous professional development within each specific assessment period.

Therefore, statements I and III are correct.

Statement I is correct. The Hong Kong Confederation of Insurance Brokers (HKCIB) and the Professional Insurance Brokers Association (PIBA) are indeed two prominent professional bodies for insurance brokers in Hong Kong.

Statement II is correct. Both HKCIB and PIBA actively engage with the Insurance Authority and contribute to policy recommendations affecting the local insurance broking industry.

Statement III is incorrect. While HKCIB and PIBA provide training to their members, this is mentioned as a separate function from assisting claimants or victims. The Insurance Complaints Bureau (ICB), the Motor Insurers’ Bureau of Hong Kong (MIB), and the Employees Compensation Insurer Insolvency Bureau (ECIIB) are the organizations that assist claimants or victims.

Statement IV is incorrect. The Employees’ Compensation Insurance Residual Scheme Bureau (ECIRS) was set up to act as a market of last resort for employers who have difficulty obtaining Employees’ Compensation (EC) insurance, particularly for high-risk occupations. It is not directly involved in handling complaints from claimants or victims.

Therefore, statements I and II are correct.

Statement I is correct. According to the General Principle 1, a licensed insurance agent must act honestly and with integrity, which includes providing accurate information and avoiding misleading representations to clients.

Statement II is correct. As per the guidelines, a licensed insurance agent should comply with all laws, rules, regulations, codes, and guidelines issued by the IA and other relevant regulatory bodies.

Statement III is incorrect. While agents must comply with their appointing insurer’s policies, procedures, and requirements, obtaining prior consent from the IA before accepting an appointment by another authorized insurer is not a requirement. The consent should be obtained from its appointing insurer.

Statement IV is incorrect. While an agent must report being wound up, adjudicated bankrupt, convicted of a criminal offense, or disciplined by certain authorities, this reporting is to the IA and their appointing insurer or agency, not the Hong Kong Federation of Insurers directly.

Therefore, statements I and II are correct.

A policy franchise operates similarly to an excess, eliminating small claims. However, unlike an excess, if the loss exceeds the franchise threshold, the entire loss is payable. This can be expressed as a percentage, an amount, or a time period. For example, if a ship is insured for $5,000,000 with a 5% franchise, a repair cost of $100,000 (2%) would not be covered, but a repair cost of $1,000,000 (20%) would be paid in full. A ‘single article limit’ is a provision commonly found in household contents policies. It restricts the amount payable for the loss of a single, valuable item if that item hasn’t been separately insured for its specific value. This protects the insurer from disproportionately large claims on unspecified contents. ‘Reinstatement insurance’ provides for claim payments without deductions for wear and tear or depreciation, offering a commercial rather than a strict indemnity. ‘New for Old’ cover operates similarly, ensuring that no deductions are made for depreciation, and is commonly used in household and marine hull policies. ‘Agreed value policies’ are used for high-value items where depreciation is not a significant factor, such as works of art. The sum insured is based on an expert valuation and agreed upon by both parties. In non-marine insurance, this sum is paid in the event of a total loss, while partial losses are paid based on the actual amount of loss.

When a client is referred to a licensed insurance agent by another person (the referrer), the agent has specific disclosure obligations to protect the client’s interests and ensure transparency. According to the guidelines, the agent must inform the client that the agent is solely responsible for arranging the insurance policy and that the client should only deal directly with the agent for this purpose. The agent must also clarify that the referrer does not represent the agent and should not be involved in arranging the insurance. Furthermore, the agent should disclaim any liability for advice given by the referrer regarding the insurance policy. Finally, the agent must instruct the client to pay premiums directly to the insurer or, if permitted, to the agent, but never to the referrer. These requirements do not apply if the referral is from a licensed technical representative within the same agency or from a licensed insurance broker acting on behalf of the client. Understanding these disclosure requirements is crucial for insurance agents to maintain ethical standards and comply with regulatory guidelines, specifically General Principle 5.4 of the IIQE Paper 1 syllabus. This ensures that clients receive appropriate advice and are protected from potential conflicts of interest or misrepresentation by the referrer. The suitability of advice, as covered in General Principle 6, is also relevant, as the agent’s advice must be suitable for the client’s circumstances, independent of any influence from the referrer.

The Insurance Ordinance (IO), formerly known as the Insurance Companies Ordinance, is the primary legislation regulating the insurance industry in Hong Kong. Let’s analyze each statement:

Statement I: Correct. The Insurance Ordinance (IO) is indeed the legislation that regulates the insurance industry in Hong Kong.

Statement II: Incorrect. The Hong Kong Federation of Insurers is a representative body for insurers, facilitating market cooperation, but it is not the legislation regulating the insurance industry. The IO is the legislation.

Statement III: Correct. The Insurance Companies Ordinance (Cap. 41) was renamed the Insurance Ordinance (Cap. 41) following amendments that came into operation on 26 June 2017.

Statement IV: Incorrect. While Lloyd’s participates in the Hong Kong insurance market, it is an insurance marketplace, not the legislation regulating the industry.

Therefore, statements I and III are correct.

Statement I is correct. According to the guidelines issued by the Privacy Commissioner, a licensed insurance agent should adhere to the record-keeping requirements of their appointing insurer or agency and submit records as soon as reasonably practicable.

Statement II is correct. Before an insurance policy application is signed (or completed if there’s no signature), the agent must inform the client of their right to cancel during the cooling-off period and the process to do so.

Statement III is incorrect. While agents should possess appropriate knowledge, the principle focuses on competence to advise, not merely possessing a license.

Statement IV is correct. A licensed insurance agent must provide clients with their name (registered and trade, if any) and license number to ensure transparency and enable informed decisions.

Therefore, statements I, II, and IV are correct.

Statement I is correct. The Insurance Ordinance (IO) does indeed classify insurance business into Long Term Business and General Business, as outlined in Schedule 1. Statement II is incorrect. While ‘Accident’ is a class of General Business, it is commonly referred to as Personal Accident (and Sickness) by insurance practitioners, not simply ‘Accident Insurance’. Statement III is correct. Class A of Long Term Business specifically includes life insurance and annuity, excluding Class C (Linked long term). Statement IV is incorrect. Capital redemption contracts (Class F) are designed to provide a capital sum at the end of a term, often to replace capital such as repayable debentures, and are explicitly stated as *not* related to human life. Therefore, statements I and III are correct.

Statement I is correct. According to the Insurance Ordinance, a licensed insurance intermediary must consider the policyholder’s circumstances to ensure the regulated activity is appropriate for them. Statement II is correct. Intermediaries are required to disclose necessary information to policyholders, enabling them to make informed decisions. Statement III is incorrect. While intermediaries must avoid conflicts of interest and disclose them, they are only required to use their best endeavors to avoid such conflicts, not absolutely avoid them. Statement IV is correct. Licensed insurance intermediaries must comply with the rules prescribed by the Insurance Authority (IA) under specified sections of the Insurance Ordinance. Therefore, statements I, II, and IV are correct.

To determine if a proposed responsible officer of a licensed insurance agency is exempt from specific education or professional qualifications, several factors are considered. Firstly, registration status with the IARB before 23 September 2019 is crucial. If the individual was a Responsible Officer, Individual Agent, or Technical Representative registered with the IARB before this date and possessed a minimum of 15 years of insurance-related experience in Hong Kong by that date, they may be exempt. Similarly, for a licensed insurance broker company, prior registration as a Chief Executive with the CIB or PIBA before the specified date, or as a Technical Representative with 15 years of relevant experience by that date, can lead to exemption. The Insurance Authority (IA) also assesses whether the proposed responsible officer has sufficient experience relevant to the nature and scale of the insurance business and the responsibilities they will undertake. Generally, a minimum of 5 years of insurance industry experience, including at least 2 years in a management role, is expected. The IA considers experience gained both in Hong Kong and elsewhere to determine if the individual can effectively fulfill the duties of a responsible officer. Therefore, the key considerations are prior registration status with relevant bodies before 23 September 2019, sufficient insurance-related experience, and the relevance of that experience to the role’s responsibilities.

To be eligible for licensing as an individual insurance agent under the Insurance Ordinance (IO), an applicant must meet specific criteria. One key requirement is that the applicant must be appointed as an agent by at least one authorized insurer. Furthermore, the applicant cannot simultaneously hold certain other licenses, such as an individual insurance agent license, an insurance broker company license, a technical representative (agent) license, or a technical representative (broker) license. They also cannot be in the process of applying for any of these licenses. This ensures that individuals focus on a specific role within the insurance industry and avoid conflicts of interest. The ‘fit and proper’ criteria are also essential, ensuring the applicant possesses the necessary competence, honesty, and fairness to conduct regulated activities.

When a licensed insurance broker believes a client’s decision regarding an insurance policy is unsuitable, the broker has specific obligations to fulfill under the Insurance Ordinance (IO) and related regulations.

Analyzing each statement:
I) Correct: The broker must explain why they consider the client’s decision unsuitable. This ensures the client understands the potential risks and drawbacks of their choice, aligning with the principle of treating clients fairly.
II) Correct: The broker must acknowledge that the final decision rests with the client, even if the broker disagrees. This respects the client’s autonomy and right to make informed decisions about their insurance needs.
III) Incorrect: While documenting the advice given is good practice, the Insurance Ordinance and related guidelines primarily focus on disclosing conflicts of interest, explaining unsuitability, and acknowledging the client’s decision-making authority. There is no explicit requirement to document the client’s rationale for their decision.

Conclusion: Statements I and II are correct.

Statement I is correct. The Insurance Authority (IA) assesses the ‘fit and proper’ status of controllers, directors, key persons in control functions, and appointed actuaries of authorized insurers, as per the Insurance Ordinance (IO). Statement II is correct. The IA considers various factors, including a person’s education, qualifications, experience, ability to act competently, honestly, and fairly, reputation, character, reliability, integrity, financial status or solvency, disciplinary action taken by any other authority or regulatory organisation against the person, if the person is a company in a group of companies, any information in the possession of the IA relating to any other company in the group of companies, or any controller or director of the person or of any company in the group of companies ; and the state of affairs of any other business which the person carries on or proposes to carry on. Statement III is incorrect. While corporate governance is related, the ‘fit and proper’ assessment focuses on individual suitability for specific roles within an insurer, not the broader corporate governance framework. Statement IV is incorrect. GL10 sets out the minimum standard of corporate governance that is expected of authorized insurers, and covers all levels of management, and all functions (risk management, underwriting, claims, client servicing, audit, etc.), of an authorized insurer. Therefore, statements I and II are correct.

When a client is referred to a licensed insurance agent by another person (the referrer), the agent has specific obligations to ensure transparency and protect the client’s interests. According to the guidelines, the agent must inform the client that the agent is solely responsible for arranging the insurance policy and that the client should only deal directly with the agent for this purpose. The agent must also clarify that the referrer does not represent the agent and should not be involved in arranging the insurance. Furthermore, the agent should disclaim any liability for advice given by the referrer regarding the insurance policy. Finally, the agent must instruct the client to pay premiums directly to the insurer or, if permitted, to the agent, but never to the referrer. These requirements do not apply if the referral is from a licensed technical representative within the same agency or from a licensed insurance broker acting as the client’s agent. Understanding these disclosure requirements is crucial for maintaining ethical standards and complying with regulatory expectations in insurance practice. The suitability assessment is a critical step before providing regulated advice. It involves understanding the client’s circumstances, considering available insurance options, and ensuring the advice is suitable based on the client’s situation. If the client does not provide necessary information, the agent must explain that the advice may not be suitable. The level of assessment should be proportionate to the client’s circumstances and the type of insurance product. Therefore, statements I, II, and III are correct.

Life and personal accident insurance are typically considered benefit policies, not indemnity policies, because indemnity aims to restore the insured to their pre-loss financial position, which is not applicable to death or injury. Statement I is correct because life and personal accident policies pay out a predetermined benefit amount upon the occurrence of a covered event, regardless of actual financial loss. Statement II is incorrect because life and personal accident insurances are generally regarded as involving an unlimited insurable interest, meaning indemnity principles don’t strictly apply. Statement III is correct because property insurance policies often allow insurers to settle losses through cash payment, repair, replacement, or reinstatement, providing different methods of achieving indemnity. Therefore, statements I and III are correct.

Statement I is correct. The Insurance Authority (IA) must assess the financial status of a business entity, including whether it is subject to liquidation proceedings, as part of determining its fitness and properness under the Insurance Ordinance (IO). This aligns with the IA’s duty to ensure financial stability within the insurance sector.

Statement II is correct. The IA considers whether a business entity has entered into a scheme of arrangement with creditors or failed to satisfy a judgment debt as an indicator of its financial stability. This is directly relevant to assessing the entity’s solvency and ability to meet its obligations.

Statement III is incorrect. While the IA assesses whether a business entity has sufficient resources to comply with financial requirements, the specific mention of ‘number of employees’ is not a direct factor considered under the financial status or solvency criteria outlined in the Insurance Ordinance (IO).

Statement IV is incorrect. The IA focuses on the financial resources available for compliance with regulatory requirements, not the number of branch offices. The number of branch offices is not a direct indicator of financial stability or solvency as defined by the IA.

Therefore, statements I and II are correct.

Statement I is correct. The IA, as per section 133 of the Insurance Ordinance (Cap. 41) and GL23, considers an individual’s reputation, character, reliability, and integrity when assessing their fitness and properness to be a licensed insurance intermediary.

Statement II is correct. The IA assesses the financial status or solvency of an individual applying for or renewing an insurance intermediary license, as it is a key indicator of their ability to manage financial responsibilities and maintain the integrity of the insurance business.

Statement III is incorrect. While the IA considers disciplinary actions taken by the Monetary Authority (MA), the Securities and Futures Commission (SFC), the Mandatory Provident Fund Schemes Authority (MPFA), or any other similar regulatory organization, it is not limited to *only* these bodies. The IA also considers actions taken by other authorities or regulatory organizations, whether in Hong Kong or elsewhere, that perform similar functions.

Statement IV is incorrect. GL23 outlines criteria for both individuals and business entities. While the IA considers the establishment of effective internal control procedures and risk management systems for business entities, this specific criterion does not directly apply to individual applicants in the same way. It is more relevant to assessing the fitness and properness of a business entity seeking an insurance agency or broker company license.

Therefore, statements I and II are correct.