Newsletter-volume 4 - 2011 (Draft) - Actuarial Society of Hong Kong

Risk margin in Hong KongFor Employee's Compensation (EC) and Motor insurance business in Hong Kong, an actuarialreview of the reserves is compulsory under the "Guidance Note on Actuarial Review of InsuranceLiabilities in respect of Employee's Compensation and Motor Insurance Business" (GN9). Forother line of business, an actuarial review of the reserves is not required.According to GN9, a risk margin in addition to the best estimate reserves of EC and Motor is notcompulsory but the reserving actuary can add a risk margin when considered appropriate. Inpractice, risk margins are usually adopted in international insurers whereas the adoption is not ascommon in local insurers. Generally these international insurers would also have adopted actuarialreview and risk margin for the non-compulsory classes on a voluntary basis. The adopted riskmargins differ by line of business and usually range from 7% to 18%. A few insurers estimatedthese risk margins based on its own data; most of the insurers based the risk margins on industrybenchmarks in other countries.Cynthia LiuAmerican International Assurance Co. LtdCharles NgSCOR Reinsurance Co. (Asia) LtdGrace YanZurich Insurance CompanyThe Actuarial Society of Hong Kong, 2202 Tower Two, Lippo Centre, 89 Queensway, Hong KongTel (852) 2147 9420 Fax (852) 2147 2497 Website: www.actuaries.org.hkNote: Views expressed are not necessary those of The Actuarial Society of Hong Kong16