Motor insurer Target Insurance deemed insolvent by Hong Kong regulator

The insurance regulator has moved to wind-up the company.

After six months of investigation, the Hong Kong Insurance Authority (IA) has moved to wind-up Target Insurance, after it was deemed insolvent after a full review by Derek Lai and Forrest Kam of Deloitte Touche Tohmatsu.

Previous reports said that almost $153m was missing from its accounts.

“Over the past six months, our efforts to recover the funds owed to Target and repeated demands for a capital injection from shareholder controllers to meet the minimum solvency margin of the company have not received any positive feedback. Target has violated the statutory regulatory requirements and its assets are insufficient to meet its liabilities. Against this background, it is incumbent upon the Managers to petition for the winding-up of Target,” the IA said.

The IA said that around 30,000 affected policies, mostly motor policies (about 96%), will remain in force until their expiry dates and policyholders may continue to submit their claims in the usual manner.

The Motor Insurers’ Bureau of Hong Kong (MIB) and the Employees Compensation Insurer Insolvency Bureau (ECIIB) will take up claims arising from third-party motor and employees’ compensation claims (estimated to be about 94% of the insurance liabilities borne by Target). As for the other insurance claims (estimated to be about 6% of the insurance liabilities borne by Target), Target will continue to handle them as permitted under the relevant laws.

“Based on the current circumstances, a statutory deposit of HK$250m ($31.85m) placed in trust with the IA for Target, together with estimated realisable assets of Target and the two insolvency funds managed by MIB and ECIIB, should be adequate to settle all valid outstanding claims and projected insurance liabilities,” Lai said.

Early this year, the IA seized control of Target Insurance and appointed managers to take full control of its affairs and property as the insurer may have breached statutory requirements under the Insurance Ordinance (Cap. 41) as well as serious deficiencies in its corporate governance.

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