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  More options for owners' corporations on procurement of third party risks insurance

In response to recent media enquiries on issues encountered by owners' corporations (OCs) in procurement of third party risks insurance, a spokesman for Home Affairs Department (HAD) today (December 24) responded as follows:

The HAD has noticed lately that some owners and OCs have raised questions over services provided by insurance companies when they procured third party risks insurance.
 
The spokesman for HAD said, "The HAD notes that the Hong Kong Federation of Insurers (HKFI) has already issued a circular to its members, stating that when handling cases relating to the procurement of third party risks insurance, members should provide options which meet the legislative requirements without charging additional premium if there is no increase in risk exposure. This serves to provide choices for consumers.

"For instance, an OC may amend its existing third party risks insurance policy or request the Building Manager to add its name as an additional insured in the Building Manager's current third party risks insurance policy to comply with the legislative requirements in respect of the minimum insured amount (i.e. $10 million) and the coverage of the policy (i.e. the bodily injury to and/or death of a third party). Members should set the premium based on whether there is an increase in risk exposure. Other administrative charges, if any, should be levied on a cost-recovery basis."

HAD notes that, in order to expedite the implementation of the concerned recommendations, the HKFI has liaised with its member companies, insurance agents and two insurance brokers associations on the best practice. The HKFI has also suggested that member companies consider taking an additional option to issue an endorsement with a Notice of Insurance, whether in the joint name of an OC and the Building Manager or not, if the limit of liability of the existing third party risks insurance policy is not less than HK$10 million and such limit covers bodily injury to and/or death of a third party as required by the new legislation. Individual member companies would inform their clients (i.e. OC) respectively.

The HKFI has set up a task force to handle the relevant issues. Should OCs or owners have any enquiry, they are welcome to visit HKFI's website at www.hkfi.org.hk or call its hotline on 2861 9329.

In 2007, the Legislative Council passed amendments to the Building Management Ordinance and the Building Management (Third Party Risks Insurance) Regulation to provide for mandatory procurement of third party risks insurance by OCs. The new legislation provisions seek to reduce the risks of huge amounts of compensation faced by owners in case of accidents and, at the same time, offer better protection for members of the public.

The Regulation requires that the third party risks insurance policy should cover liabilities incurred by an OC in relation to the common parts of the building and the property of the OC in respect of bodily injury to and/or the death of a third party. The minimum insured amount of the policy shall be $10 million for each event. The provisions will come into effect on January 1, 2011.

Ends/Monday, December 24, 2010
Issued at HKT 18:04