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 on 13 September 2007, DOFIs wishing to continue operating in the Australian market must be authorised by APRA. The new authorisation requirements are designed to ensure that Australian policyholders have the security of Australia’s strong prudential regime for general insurers and 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 earlier today by Assistant Treasurer Chris Bowen, (click here for this announcement).
APRA Member John Trowbridge said Australia continues to welcome overseas insurers that wish to participate in the Australian market. “Overseas insurers need to apply to APRA for authorisation if they plan to write insurance business in Australia after 1 July 2008 so that the authorisation process can commence,” he said. “Those 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 holding an Australian financial services licence (AFSL), for example, insurance brokers, will be able to place insurance business only with APRA authorised insurers or in accordance with the exemption regime announced by the Assistant Treasurer.
ASIC Executive Director of Compliance, Jennifer O'Donnell said agents’ and brokers’ compliance obligations under the AFSL will change from 1 July 2008 and they will not be able to deal with unauthorised DOFIs other than through the limited exemptions announced by the Assistant Treasurer. Jennifer O'Donnell said, “AFSL holders will generally be prohibited from dealing with unauthorised DOFIs. The Government has proposed that where they do deal with DOFIs under the limited exemption they will be required to report this activity to ASIC through statistical returns. Further consultation about the content of those returns will occur in due course.”
APRA is advising foreign insurance associations and journals to ensure that information about the new regulatory regime for foreign insurers is widely disseminated.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $3 trillion in assets for 21 million Australian depositors, policyholders and superannuation fund members.