LC: Opening remarks by SCED in moving motion in accordance with Hong Kong Export Credit Insurance Corporation Ordinance
Following is the English translation of the opening remarks 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 (Cap. 1115) in the Legislative Council today (May 25):
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 to promote and support the export trade through the provision of insurance protection 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, and section 23 stipulates that the contingent liability of the ECIC under contracts of insurance shall not exceed a specified amount which may be determined by the Legislative Council by resolution. Currently, the level of the ECIC's maximum contingent liability is $40 billion.
The Financial Secretary proposed in the 2017-18 Budget that the cap on the contingent liability of the ECIC be raised from $40 billion to $55 billion. As of April 30, 2017, the contingent liability of all valid policies amounted to about $38.8 billion, representing 97.1 per cent of the cap of $40 billion. The ECIC estimates that the contingent liability would reach $40 billion by mid-2017.
To strengthen our support for Hong Kong exporters, particularly small and medium enterprises, in light of the uncertainties in the global business environment, we need to provide our exporters with further support to enable them to sustain their business and open new markets. In view of the continuing volatility in the global markets, we consider that the ECIC should be provided with sufficient underwriting capacity so that it can continue to provide export credit insurance covers to Hong Kong exporters. It is expected that the new cap of $55 billion should be sufficient to meet the ECIC's business growth in the next five 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 ECIC's prudent approach to business and its healthy financial condition, we do not expect that there would be a need for the Government to provide funding 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 and review its financial situation regularly.
President, I beg to move.
Ends/Thursday, May 25, 2017