LC: Speech by SCED in moving motion in accordance with Hong Kong Export Credit Insurance Corporation Ordinance
Following is the English translation of the speech by the Secretary for Commerce and Economic Development, Mr Gregory So, in moving a motion in accordance with the Hong Kong Export Credit Insurance Corporation Ordinance in the Legislative Council today (December 19):
I move that the motion as set out under my name on the Agenda be passed.
The Hong Kong Export Credit Insurance Corporation (ECIC) was established in 1966 under the Hong Kong Export Credit Insurance Corporation Ordinance. It aims to support export trade through the provision of export credit insurance covers for Hong Kong exporters against non-payment risks arising from commercial and political events.
Section 18 of the Ordinance provides that the Government shall guarantee the payment of all moneys due by the ECIC. Section 23 stipulates that the contingent liability of the ECIC under contracts of insurance shall not at any time exceed a specified amount determined by the Legislative Council by resolution. Currently, the level of the ECIC's maximum contingent liability is $30 billion.
As at November 30, 2012, the contingent liability of the ECIC amounted to about $29 billion, or 96.8% of the maximum liability permitted. The ECIC forecasts that it will reach its existing cap on contingent liability by the end of March 2013.
With the continuing uncertain global economic environment and taking into account the business growth of the ECIC in the coming few years, we consider that the ECIC should have sufficient underwriting capacity to continue to provide export credit insurance for Hong Kong exporters, especially small and medium enterprises. We propose to raise the ECIC's contingent liability from $30 billion to $40 billion. According to the ECIC, the new cap should be sufficient to meet its business growth in the next four years.
I would like to emphasise that the contingent liability only refers to the maximum amount for which the ECIC could be contractually liable to indemnify policyholders in respect of its insurance policies. The actual claims figures in the past were far below the maximum contingent liability. In view of the ECIC's prudent approach to business and its healthy financial condition, we do not expect that there will be a need for the government to provide financial assistance to the ECIC to meet its liabilities in at least the short to medium term. The ECIC will continue to conduct its business within the bounds of prudent risk management.
Mr President, I beg to move.
Wednesday, December 19, 2012