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International Law: Australian Regulatory Compliance Review
Foreign insurers in Australia
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.
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
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