THE
HONG KONG LAW SOCIETY
PROFESSIONAL INDEMNITY INSURANCE SCHEME
Memorandum to the Panel on Administration of Justice
and Legal Services, Legislative Council
Phyllis Kwong Ka Yin
14th June 2004
I.
Statutory Framework of Hong Kong Solicitors’ Indemnity
rules
Pursuant to Section 73A of the Legal Practitioners Ordinance, Cap. 159
(“LPO”), the Council of the Law Society may make
indemnity rules concerning indemnity against loss arising from claims
in respect of any description of civil liability incurred
(a) by a solicitor or former solicitor in connection with his practice
or with any trust or of which he is or formerly was a trustee;
(b) by an employee of a solicitor or former solicitor in connection
with that solicitor’s practice or with any trust of which
that solicitor or the employee is or formerly was a trustee.
Section 73A (2) provides for 3 models of indemnity rules which:
(a) may authorize or require the Society to establish and maintain a
fund or funds; (the “Mutual Fund’ model)
(b) may authorize or require the Society to take out and maintain
insurance with authorized insurers; (the ‘Master
Policy’ model);
(c) may require solicitors or any specified class of solicitors to take
out and maintain insurance with authorized insurers (the
‘authorized insurers’ model)
Section 73A (4) prescribes that a solicitor failing to comply with the
indemnity rules may be subject to disciplinary proceedings.
Section 73A (6) prescribes that every rule made by the Council under
this section shall be subject to the prior approval of the Chief
Justice.
The 3 models permissible under S73A (2) of LPO are not necessarily
mutually exclusive of each other and on a proper construction of the
section, an indemnity regime which is a combination of two or more of
these models, or consisting of the co-existence of more than one of
these models is permissible, subject to the prior approval of the Chief
Justice, ‘having regard to the Law Society
Council’s consultation with Law Society members’.
II. The Indemnity models under S73A (2), LPO
In the Willis Report,
“Mutual Fund’ is defined as an arrangement under
which members of a group decide and agree to pool the risks of all of
them and to contribute to the losses that might be incurred by all or
any of them. The mutual sets the terms of indemnity to its members
which are the same for all; the mutual sets the contribution each
member must make and establishes the administrative arrangements for
managing the mutual, appointing persons to manage, and the rules for
calculating and collecting each members contribution, the management of
claims, compliance with statutory requirements, investment of funds,
control mechanisms such as voting rights and ultimately for winding up
the mutual and distribution of any of its remaining assets.
‘Master Policy Scheme’ is defined as an arrangement
where a single insurance policy is issued by commercial insurers to a
body representing the members of a profession and covers every member
of the profession within limits and terms and for a premium that is
predetermined by agreement between the master policy holder [the
Society] and insurers.
‘Qualifying Insurer Scheme’ is defined as an
arrangement under which an insured professional qualifies to carry on
business by purchasing cover from an insurer who has previously agreed
to comply with qualifying pre-conditions set by the
profession’s representative body. [pre-supposes that the
insurer is otherwise authorized by law to trade as an insurer]
‘Captive’ is described as similar to a mutual
scheme, but it is conducted through the medium of licensed insurer that
is subject to similar regulation, but lower capital requirements as any
licensed insurer.
The Captive insures only the profession that owns it
and operates for the benefit of its owner. Its management can be
retained by representatives of the professional body or outsourced to a
professional captive manager.
A captive insurance company is the epitome of a self-insurance program.
The term ‘captive’ as defined by the Webster
dictionary means ‘owned or controlled by another concern and
operated for its needs rather than for an open market’.
Since 1980, when professional indemnity insurance became compulsory for
solicitors, a Master Policy regime under S73A (2) (b) was set up.
The current Mutual Fund regime is constructed pursuant to S73A (2) (a)
since 1989.
It is open for the profession to opt for, and within the discretionary
power of the Law Society Council to make rules of, one or more of the
models allowable under S73A, or a combination or hybrid of them.
In my view, both the Qualifying Insurer Scheme (QIS) and the Captive
fall within the ‘authorized insurer’ model under
Section 73A (2) ( c ). Whereas a QIS is a commercial open market
insurance scheme, a Captive is a non-commercial self-insurance scheme.
The choice is between commercial or non-commercial insurer, and open
market or self-insurance.
III. The Way Forward
In exploring the way forward, it is imperative to investigate firstly,
the flaws with the existing system so as to avoid making the same
mistakes in future. Secondly, it is important to lay down the basic
principles for the choice of the future solicitors professional
insurance scheme. The 4 million Willis Report was conducted by a
commercial insurance consultant, which sees its role as ‘to
assess information, statistics and facts about forms of insurance and
their suitability for Hong Kong circumstances and their availability,
price and sustainability in the commercial insurance market.’
Non-commercial considerations, such as matters of public policy, seem
to be of peripheral significance for Willis’ recommendations,
and is therefore unsatisfactory. The Willis Report had also failed to
provide any pricing indication for each of the future options which it
proposes. There is perhaps a self-interest element in Willis ignoring
non-open-market not-for-profit models.
(a) The Flaws of the existing Professional Insurance Scheme
1. The main dissatisfaction with existing PIS scheme is that the
solicitors ‘have to act as insurers of last resort for each
other’, or in insurance terminology, the profession retains
to itself the ultimate underwriting risk. The HIH collapse had exposed
this risk, which is constituted by
the following arrangements:
i. The HKSIF is its own insurer or the lead insurer and all solicitors
are subjected to the liability to indemnify the Fund for the full ten
million limit on each and every claim, less the reinsured risk of
HK$8.5 million on each claim.
ii. Since 1st October 2001, HKSIF did not have stop loss reinsurance
for the retained liability of HK$1,500,000 for each claim.
Any future scheme must be designed to transfer the ultimate
underwriting risk outside the profession. This can be achieved by
restructuring the reinsurance arrangement. It must be noted however
that there is no legal requirement at all that solicitors must retain
the underwriting risks within the profession.
2. The Willis Report mentioned about ‘modernizing the
decision-making process and management structure’ of the
insurance scheme, but did not go into detailed analysis of the
problems. In my view, this is in fact the root of the problems
surrounding the existing PIS regime, which are briefly summarized as
follows:
i. Had there been mal-management ?
The main object of the HKSIF is to hold, manage and administer the fund
established by the Law Society under Section 73A of LPO and in
accordance with the Rules. It is specifically provided at its
Memorandum of Association that HKSIF is not authorized to carry on any
insurance (including reinsurance) business governed by the Insurance
Companies Ordinance (Cap.41). All the directors of HKSIF are current
Council members of the Law Society appointed by the Law Society
Council. Day-to-day management of HKSIF is performed by Essar Insurance
Services Ltd. (‘Essar’) which reportedly manages
the PIS Scheme ‘as directed by the Law Society
Council’. The Law Society Council members are not insurance
professionals, and there had not been any reported supervision system
in place, such as periodic financial reporting (other than its annual
report) and performance audit over the operation of HKSIF. What are the
roles of the Board of Directors of the HKSIF vis-à-vis the
operation of the PIS fund? How are investment decisions made? How are
premium/contribution-rating strategies set?
ii. Had there been conflict of interests?
All claims under the Fund are handled by the Claims Committee, a
committee set up by the Law Society Council. Claims are either
defended, or settled. The Claims Committee refers the claims to the
‘Panel Solicitors’, consisting of about 10
appointed solicitors firms, for defending/settling the claims.
According to the Willis Report (Table No.4 at p.51), the defence costs
for the years 2000 to 2002 are as follows:
Policy Year
Total Payment
(HK$)
% of payment
for defence costs
Amount of defence cost
(HK$)
2000
26,105,191.17
54.8%
14,305,644.76
2001
11,415,442.67
88.7%
10,125,497.65
2002
1,213,197.62
67.0%
812,842.41
The total amount of defence costs for the years 2000 to 2002 stands at
HK$25,243,984.82. It was remarked in the Willis Report that
‘Assume for the sake of argument that 20% of all liabilities
of the Scheme is the cost of defending claims, that is
HK$277,000,000.’ The actual figure is probably much higher.
The shortfall contribution, the central theme of the current dispute
between the Law Society Council and the membership, amounts to
HK$132,893,268.00, which is less than half of the aforesaid estimated
defence costs.
There is a high degree of overlap of the Law Society Council members,
the Claims Committee members and the Panel Solicitors. There is
therefore an apparent and prima facie conflict of interests situation.
iii. Is there sufficient transparency and accountability?
The general membership of the Law Society are not members of HKSIF. The
HKSIF is therefore not directly accountable to the Law Society members.
The Law Society Council had refused to respond to enquiries of members
regarding the operation of the HKSIF, and had refused to disclose
relevant documents, such as the management contract between HKSIF and
Essar. This has aggrevated the loss of confidence of the general
membership towards the Law Society Council.
iv. Lack of supervision and regulation of the operation of HKSIF
The Fund administered by the HKSIF is not registered as a Mutual Fund
and HKSIF
is not a licensed insurer. The administration of the Fund is therefore
not regulated or supervised by any regulatory body, such as the
Monetary Authority, or the Insurance Commissioner. Had there been
proper corporate governance? Are the interests of the payers of
contribution (equivalent to policy holders under a typical insurance
regime) properly protected? Is there any recourse for the members who
feel aggrieved?
(b) The Basic principles for a professional insurance scheme
I suggest that any future solicitors professional insurance scheme must
have features which are in line with some basic principles, which I set
out briefly below:
1. Public Policy considerations
In the DOJ paper to the Legco of May 2004, it was mentioned that the
professional indemnity insurance scheme must remain compulsory on
grounds of public interests, namely, firstly, ‘in ensuring
that persons who sustain loss or damage through the default of their
solicitors will not fail…to obtain compensation because
their solicitors may not have sufficient funds’. (paragraph
7) Secondly, it will augment Hong Kong’s position as a legal
services centre offering an equivalent level of protection [to the
users of legal services] as in other major common law jurisdictions.
(paragraph 17 and 18)
However, the DOJ paper (at paragraph 15) is misconceived in referring
to solicitors holding clients’ money as a ground for
requiring mandatory professional insurance, in that under the statutory
framework of S73A LPO, only civil liabilities are protected.
Solicitors’ default involving fraud or dishonesty is not
covered.
It is equally misconceived that mandatory professional insurance would
promote competition among law firms of different sizes, that
‘without assurance that all solicitors are insured, prudent
clients would be likely to turn to the bigger and more established
firms for legal services, and small firms might have difficulty in
competing for business’. (paragraph 16) By imposing a uniform
premium/contribution formula, smaller firms are put in a less
competitive position than their bigger counter-parts. One of the
criticisms of the current system is that there is no differentiation of
premium rates for high risk work (such as conveyancing and civil
litigation) and low risk work. There is also no differentiation of
geographical cover. Being mandatory should not preclude an insurance
scheme from the flexibility of providing tailored-made programs that
suits the specific modes of operation of individual law firms of
different sizes.
The DOJ paper had totally ignored the interests of the profession. In
my respectful submission, it is in the public’s best interest
to maintain an affordable, equitable and effective professional
insurance scheme that would promote the delivery of a strong,
independent and efficient legal services industry. Not only will this
be conducive to the upholding of the Rule of Law, it will enhance
protection of consumers (users of legal services) interests by ensuring
access to justice for all (there being no anti-competition mechanism),
and protection of consumers interests through higher quality and lower
prices. The existing PIS scheme is such a cumbersome and inequitable
burden on the profession that it endangers the very survival of the
whole profession. This is definitely not in the public interests and is
inconsistent with Hong Kong’s goal of being a major services
centre for the Asia Pacific region.
In short, it is in the public interest that the future
solicitors’ professional insurance scheme strikes the right
balance between protecting the consumers’ interests and the
profession’s interests. It should not be anti-competitive and
it should be flexible enough to suit the different needs of different
legal practices.
2. Segregation from the other functions of the Law Society
Insurance is a specialized business requiring specific expertise. As
lawyers we are not trained or qualified to be insurers. Insurance
business is a regulated business and the Law Society should be no
exception.
The present PIS scheme run by the Law Society is
un-regulated, non-transparent and non-accountable, breeding conflicts
of interests and abuses.
Any future insurance arrangement for the profession should be
segregated from the Law Society’s other functions which
should be regulated, run by insurance professional, accountable to the
members of the Society, and subject to stringent corporate governance
in line with best management practice.
3. Basic features of a Professional Insurance Scheme
Irrespective of which of the model under S73A of LPO the profession
will opt for, any future PIS should embrace the following
non-exhaustive features:
An independent, professional management team with strong,
professional ethics, adhering to
modern corporate governance standards;
Regulated and supervised by appropriate regulatory authority(ies);
Equitable and transparent premium structure that features
Reasonable and affordable basic premium rate;
Premium loading/ surcharge for high risk practice, such as
conveyancing and civil litigation;
‘users pay’ principle that links premium rate to
firm size and claims history
Claims handling and monitoring mechanism that are cost-effective,
efficient, and fair
Minimal operation costs
Optimal insurance coverage
Flexibility that caters for the different needs of different modes
of legal practices
transfer of ultimate underwriting risk outside of the profession.
IV. What Hong Kong can learn from other common law jurisdictions?
The Willis Report had devoted one section outlining the professional
insurance arrangements in other common law jurisdictions. Strangely,
however, the Willis Report concluded that the status quo, with slight
modification, should be maintained, and put forward only the QIS
modeled on the England and Wales scheme as the only alternative option
for Hong Kong.
I highlight below the professional insurance arrangements in England
and Wales, New South Wales of Australia, as well as Quebec and Ontario
of Canada.
England and Wales: Mutual QIS ???
England and Wales had a Master Policy since 1977. The Solicitors
Indemnity Fund (SIF) came into operation on 1 September 1977 and
continued in operation until 1 September 2000, when a Qualified
Insurers Scheme replaced it. The reasons for the shift from SIF to QIS
are as follows:
Similar to the Hong Kong situation, in early to mid 1990s, there had
been a significant increase of claims resulting in a shortfall of
assets to liabilities of the Fund, and a call for levy/supplementary
contributions on law firms. The shortfall was aggravated by high costs
of investigation and defence of claims and high management costs of the
SIF. A group of small and medium law firms brought judicial review
proceedings against the Law Society claiming that the SIF is a
mandatory monopoly and was in breach of European Union Competition
Regulations and was ultra vires the Law Society.
After a consultation
process that involved preparing various reports, receiving submissions
from various interests groups and parties, and a postal ballot on all
the members, the SIF scheme was scrapped and a QIS put in place in
2000.
The aim of the QIS was expressed to be ‘to transfer
underwriting risk outside the profession and to give individual firms a
choice of insurer, whilst retaining to the maximum degree possible the
protection for the consumer and certainty of cover for
solicitors’ firms provided by the [present] SIF arrangements.
(paragraph 14 , 13.04.00 Council paper – future arrangements
for Professional Indemnity cover)
As mentioned, the QIS is an open-market commercial insurance scheme.
The main advantages are freedom of choice and transfer of underwriting
risk.
The QIS enjoyed an initial honey-moon period of success, with a
reduction of GBP 100m premium in its first year. By 2002, premium price
increases from 20% to 50% (there had been estimates of 300% increase).
(Law Society Gazette, Vol 99 No.31 p 20) The open-market commercial
insurance hardened since 9-11 and Enron, and it is interesting to note
that in a recent article published in the Law Society Gazette, UK
(21/05/04), whether the open market gives solicitors a better deal on
indemnity was questioned.
In an articled entitled ‘Death by insurance’
(26/06/03 Law Society Gazette, UK), it was written:
‘It is worthy to note that other professions and industries
have been similarly squeezed. The remedy for some has been to form
captive insurers. The Society did this with the formation of the SIF.
As we walk away, others, perhaps better informed, are moving
in…
The legal profession is now in a complete mess over professional
indemnity insurance. We need to go back, and revive the SIF to act in
tandem with the market. This will at least extend capacity, and choice
for solicitors.
The stronger firms can secure better firms in the market, leaving the
weaker firms covered by the SIF. The weakest will be refused cover.
Think back to those halcyon days, when indemnity insurance was just a
small cloud on the horizon. Little did we know that we were about to
face gale-force winds.’
Should Hong Kong follow the footsteps of England and Wales in its
search for the future professional indemnity insurance model?
New South Wales, Australia: Mutual Master Policy Captive
The experience of New South Wales (NSW) is interesting in that at the
time of the crash of HIH in April 2001, the entire underwriting for the
three year period 1999-2001 was with the failed company. (Willis
Report, p.143)
The Willis Report wrote: ‘When HIH collapsed, it was
estimated that there were outstanding PI claims liabilities of some
A$112 million. At that time the funds held by the Solicitors Mutual
Indemnity Fund (SMIF) were of the order of A$85 million, leaving a
potential deficit of A$27 million. The NSW government quarantined the
SMIF surplus fund to help meet the HIH shortfall’.
Lawcover, a not-for-profit company and wholly owned subsidiary of the
Law Society, administer the professional indemnity insurance on behalf
of the Law Society of NSW.
In the year 2002-3, the total Scheme premium increase was kept at 5%.
In 2003-4, scheme premium increase was kept at 10.5%.
On 16th April 2004, the Australian Prudential Regulation Authority
(APRA) has granted LawCover Insurance Pty Limited (LawCover Insurance)
an insurance licence, and the NSW professional insurance scheme had
moved towards a risk retention model involving an APRA-regulated
on-shore captive insurer.
In LawCover Insurance’s Media Release of April 16 2004, it
was mentioned that ‘the establishment of LawCover Insurance
is a strategic move away from the previous agency model and is designed
to better insulate the NSW legal profession from the capacity and
pricing volatility of the general insurance market, which should in
turn provide increased stability and affordability of Compulsory
Professional Indemnity Insurance than has been the case in the recent
past.’
Post HIH, 9-11 and Enron, the NSW legal profession had opted for the
Captive model rather than the QIS, Master Policy or Mutual Fund model.
Canada – Quebec : shining success: mutual + Captive
The Willis Report wrote (P.152) : ‘Quebec’s captive
is a shining example of a successful mutual arrangement operated
through a licensed captive insurer….It provides cover with a
limit of C$10 million against all civil liability. The scheme has
averaged about 800 claims per year over the last 10 years. In 1999 the
contribution by the lawyer was C$1. It now offers cover for no premium
and that premium holiday has lasted for 5 years!’
In its Annual Report of 2003, the following features were highlighted:
All operating expenses were entirely paid from investment income
generated by members’ equity;
Total return on investment was 10.9%,
Dispute resolution through negotiation, with or without mediation,
was one of the priorities. In a majority of cases, the settlement
occurred without any proceedings having even been filed. A significant
proportion of claims having no basis in law were withdrawn after
explanations were provided to the client.
In 2003, the general insurance coverage was doubled
The Fund added insurance covering misappropriation of funds
deposited in trust with coverage of C$1,000,000 for related legal
costs.
Coverage was added for proceedings instituted worldwide outside
Canada.
The Report concluded that ‘consistently affording greater
protection to the public and members while maintaining a premium
holiday is not an easy task, given that we offer the most comprehensive
compulsory liability coverage in North America’.
Canada – Ontario: Master policy + captive
The Ontario model is described in the Willis Report (p.152) as follows:
Lawyers’ Professional Indemnity Company (LawPro), a
captive licensed insurer owned by the Law Society of Upper Canada is
the sole compulsory provider of Professional Indemnity Insurance in
Ontario and Newfoundland.
The policy is issued to the Law Society of Upper Canada and the
scheme can be characterized as a Master Policy scheme in which the
insurer is a captive.
A Levy is charged on conveyancing and civil litigation on a
transaction basis on the client as a disbursement.
It is interesting to note the following paragraph from the Willis
Report (at p.153)
‘In the early 1990’s Ontario’s scheme
faced a crisis that has some similarities to Hong Kong. Escalating
claims, largely arising from conveyancing and litigation work, left the
(then) mutual with a shortfall between outstanding claims liabilities
and its assets. The response was to isolate the insurance arrangements
from the other activities of the Law Society and allow it to be managed
on commercial lines by professionals with insurance expertise. The
control of captive remains ultimately with the Law Society as the owner
for the benefit of the members of the Society but the day to day and
overall management of the insurance arrangements are done by
professionals in insurance. The company is a licensed insurer and a
corporation with its directors and officers being subject to the usual
corporate governance and accountability standards of
corporations….’
Another interesting point to note is that in LawPRO’s 2003
Annual Report, it was stated that ‘in 2003, LawPro opted to
retain all of the risk under the Law Society’s primary
program itself, rather than place a portion of the risk with the
reinsurance markets…..When insurance market
‘hardened’ in 2003, and pricing for reinsurance
increased dramatically, we were ready to assume all of the risk for the
Ontario primary program within LawPRO. Our ability to take this course
of action enabled us to avoid premium increases for both 2003 and again
for 2004 – a rarity among insurers today.’
V. Exploring the suitability of the Captive Model as Hong
Kong’s future professional insurance Scheme
At p.132 of the Willis Report, it was stated:
‘A captive insurer licensed under the Insurance Companies
Ordinance and incorporated in Hong Kong could provide to the public and
to solicitors all the benefits of the current scheme with the added
benefits to the members of the profession that it would limit their
liability for losses in the event of a reinsurer’s insolvency
of a catastrophic claims loss that had not been anticipated and for
which there were insufficient assets.’ At p.133, it was stated
that:
‘the government of the HKSAR is encouraging the establishment
of captive insurers in the territory to promote Hong Kong as a captive
centre within the Asian Region.’
Prima facie, the Captive Model is in line with public policy of
protecting public interests and affording adequate protection to the
profession, with the added benefit of limited liability and being
regulated.
Advantages of the Captive Insurance
The advantages of Captives include:
Alignment with the profession’s goals: Captive insurance
companies underwrite policies that are custom-made for its
owner/program participants, allowing the insured to enjoy the benefit
of purchasing specific coverages that they might not be able to
purchase from a commercial insurer, or at all, and at competitive
rates.
Stability: As the insured designs its own program, it also avoids the
impact of insurance industry coverage and pricing fluctuations.
Control over claims: Captive insurance, essentially being
self-insurance, provides incentives for owners to reduce or eliminate
the potential for claims through proactive risk control and claims
management techniques.
Direct access to reinsurance: Captive insurance allows owners/program
participants direct access to the reinsurance market, thereby resulting
in lower rates of without paying commissions to commercial insurers.
Disadvantages of Captive Insurance
Capitalization and commitment: Establishing a captive insurance company
requires a substantial amount of initial capital to ensure that the
captive remains financially healthy during tumultuous times.
Potential for inadequate loss reserves: When actual losses exceed
initially expected levels, captive insurance companies might need
additional funds to be allocated. If risks are not well-assessed
initially, the captive owner could suffer adverse financial
consequences.
( Source: Spring Consulting Group, LLC)
Shift from open-market to self-insurance
Another trend which we see from other common law jurisdictions is that
there is a shift from commercial insurance to self-retention of risks.
The current insurance market situation where insurance is available
only at a high price, if at all, is the underlying reason for such
trend.
It is pointed out that ‘the self-insurer is not exposed to
the moral hazard problem because it has an incentive to minimize
losses. The aggregate limit of all retained loss exposures will be
affected by three main factors:
(1) the predictability of this limit
(2) the availability of protection for catastrophic losses
(3) the financial strength of the self-insurer’
The advantages for self-insurance are:
Reduce or eliminate the loading for transaction costs
Assume a credibility of 100% to its own experience
First beneficiary of risk control measures
Funds available immediately
Investment income through the investment of premiums until they are
required to pay claims
Disadvantages for self-insurance are:
No protection against adverse frequency (to be overcome by
stabilization program)
Cost of technical, actuarial and legal services (to be overcome by
cost-reduction program)
(see: Theory and Practice of Insurance, J. Francois Outreville, p.186)
VI. Recommendations
It is suggested that the Law Society, the Administration and the
Legislature conduct further investigation on the suitability and
desirability of replacing the current mutual scheme with a Captive
insurance scheme in Hong Kong.
It is further suggested that the initial capital of the Captive be
consist of:
Contribution from the Hong Kong Law Society from its reserve (the
Law Society of NSW has contributed $6 million from its Special Reserve
as initial capital to LawCover Insurance);
Contribution/loan from the HKSAR government as a special relief fund
(essentially, to cover the HKSIF shortfall).
The proposed Captive will be further funded by:
Premium payments from the Law Society members;
Special levy surcharges on conveyancing and civil litigation
services on transaction basis, to be charged on clients on an ad
volerem basis as disbursements, and to be collected by the Land
Registry and Court Registry respectively. The fund collected from the
levy surcharge can be designated for protection of the
clients’ interests against solicitors’ fraud (not a
civil liability) or re-insurer insolvency/default.
Upon the establishment of the Captive, all the assets and liabilities
of HKSIF will be transferred and vested absolutely in the Captive, and
thereafter HKSIF be wound up.
The Captive will be empowered to administer the runoff of claims
notified up to September 2005 before the dissolution of HKSIF.
It is imperative that the management and operation of the Captive be
separate and independent of the Law Society Council and be in line with
best corporate governance benchmark. Its Board of Directors should be
appointed by the Chief Justice and shall consist of members of the
public, representative(s) from the HKSAR government, and financial
professionals such as actuary(ies), merchant banker(s), financial
advisor(s), and of course, insurance expert(s).
The survival and well-being or otherwise of the solicitors professions
hinges on how well the HKSIF crisis is managed. The existing scheme
whereby the profession is required to underwrite the risk of re-insurer
default is unreasonable and is catastrophic to the profession.
A strong, independent legal profession, including the solicitors
profession, is in the best interest of Hong Kong.
This paper is for the reference of the Panel on Administration of
Justice and Legal Services, Legco and will be copied to the Chief
Justice, the Secretary for Justice and the President of the Law Society
of Hong Kong for their reference.
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