HONG KONG SAR, CHINA Law and Practice Contributed by: Edwin Northover, Jan Buschmann and Tony Dymond, Debevoise & Plimpton
subject to the same statutory duties vis-à-vis insureds as apply to brokers, including an obligation to act in the best interest of the insureds. Some of these obli- gations are hard to reconcile with their role as agents of the insurers, which has been subject to extensive criticism during the legislative process that applied the statutory duties to insurance agents. Detailed regulatory obligations applicable to insurance brokers and agents are set out in the respective codes of conduct issued by the IA. 6.4 Legal Requirements and Distinguishing Features of an Insurance Contract Features of Insurance Contracts The distinguishing features of an insurance contract are determined by reference to English case law, namely as an arrangement under which considera- tion is paid for the provision of benefits upon the hap- pening of an uncertain event that is adverse for the insured. The common law does not require insurance contracts to be in writing, but there are legal and regu- latory requirements in relation to the issuance of policy documents, and it is universal practice for insurance contracts to be issued in written form. Generally speaking, there are no specific minimum terms for an insurance contract to be legally valid, though the key terms must be agreed with reasonable certainty or there must be a mechanism for unresolved terms to be agreed at a later stage. In practice, pre- miums and cover will usually be clearly set out in the insurance policy (or the reinsurance treaty in the case of reinsurance). There are also numerous regulatory requirements in relation to the structure and terms of certain types of policies. Insurable Interest For life insurance contracts, the insured must at the outset have an insurable interest in the person whose life is being insured. Certain persons are legally regard- ed as having an unlimited interest in the life assured (ie, the person whose life is being insured under the policy), such as the life assured themselves and their spouse. Parents are also deemed to have an insurable interest in the lives of their children under Hong Kong law. For other relationships, the insured will usually
need to have an economic interest in the relevant life in order for the policy to be valid. While an insurable interest is not strictly speaking required for most types of general insurance con- tracts, they must not amount to gambling or wager- ing, and the insured must typically prove loss after the insured event occurs. 6.5 Multiple Insured or Potential Beneficiaries Beneficiaries and Unnamed Insureds It is common for persons other than the insured/poli- cyholder to be beneficiaries of a life insurance policy. Where certain close family members are named as beneficiaries, this creates a statutory trust in their favour. It is also possible for certain unnamed persons to obtain rights against the insurer – for instance, on the basis of the Contracts (Rights of Third Parties) Ordi- nance. The ordinance enables third-party enforce- ment if the contract expressly provides that the third party may enforce the insurance contract or the con- tract purports to confer a benefit on the third party. However, the operation of the ordinance is typically excluded by policy wording in Hong Kong. Unnamed persons may also receive the benefit of group insurance policies, such as insurance taken out by employers for the benefit of all their employees. Beneficiaries may also be described generically by reference to certain characteristics. There are other cases where unnamed persons can become insureds on the basis of agency considera- tions, though those cases are rare and will not be con- sidered further here. Impact on Disclosure Obligations The impact of a wider group of insureds on disclosure obligations is that material facts in relation to the risk arising from those insureds must be disclosed. Where the cover extends to unnamed persons (rather than the unnamed persons just being beneficiaries/payees of the insurance proceeds), the disclosure obligation is therefore also correspondingly extended.
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