The
Australian Prudential Regulation Authority (APRA) and the Australian
Securities and Investments Commission (ASIC) are jointly reminding
direct offshore foreign insurers (DOFIs) and local insurance brokers
about the new authorisation requirements for foreign insurers that come
into effect on 1 July 2008.
Following the passage of the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007, DOFIs wishing to continue operating in the
Australian market must be authorised by APRA. The new authorisation
requirements are designed to ensure that general
insurers are prudentially regulated and consumers are protected from dealing with unauthorised DOFIs that
would not meet the standards required of an APRA-authorised insurer.
Some business will still be able to be placed with DOFIs that are not
authorised as long as this business is placed in accordance with the
exemption regime outlined below.
Overseas insurers
that provide a substantial application for authorisation by 31 May 2008
will be allowed to continue operating as DOFIs for a limited transition
period after 1 July where consideration of their application by APRA is
not complete by that time. Foreign insurers will be subject to the
sanctions provided for under the Insurance Act 1973 if they
have not applied to APRA for authorisation and continue to write
business not covered by the exemption provisions after 1 July 2008.
From
1 July 2008, intermediaries (such as agents and brokers) holding an Australian financial services
licence (AFSL) will be able to place
insurance business only with APRA authorised insurers or in accordance
with the exemption regime.
Exemption
arrangements
The Assistant Treasurer and Minister for Competition Policy and
Consumer Affairs, Chris Bowen has announced the limited exemption
arrangements for direct offshore foreign insurers (DOFIs).
An exposure draft of the regulations implementing the exemption
arrangements will be released for consultation by late April 2008.
The
exemption balances the need for protection for Australian business and
consumers with the acknowledged need that some insurance will not be
able to be placed in Australia.
The exemption is comprised of three main limbs:
- high-value insured;
- atypical risk; and
- customised
