Today (Friday, 21 February 2003), the Employees Compensation Insurer Insolvency Bureau (ECIIB) announced its establishment. The ECIIB was set up by the insurance industry to handle applications for compensation arising from the insolvency of insurers engaging in employees' compensation business on or after 1 April 2004.

Following the approval of an application, the employee will be given the same level of entitlement under the Employees Compensation Ordinance.

Beginning 1 April 2003, each employees' compensation policy shall contribute 2% of its gross premium towards the compensation fund. Based on currently available data, it is estimated that around HK$80 million would be collected after its first year of operation. The ECIIB plans to continue to accumulate funds over a long period of time. However, if the fund-size reaches a comfortable level in the future and there is margin for a reduction of the rate of charge, the ECIIB may respond positively to such circumstance.

Claimants shall have to queue for receipt of compensation in the event the fund size falls short of the total amount of prospective claims, similar to current arrangements under the Employees Compensation Assistance Scheme.

"The purpose of the fund is solely to perform the role of protector of last resort. The Insurance Authority's latest requirement of actuarial audits on the employees compensation insurance business, which is aimed at strengthening its regulatory controls over the solvency margin of insurers, is among other effective apparatuses to ascertain the financial stability of insurers," said Mr K P Chan, Chairman of the ECIIB.