Module Application
- Does your organisation seek to obtain approval to carry on a general insurance business in Australia?
- Does your organisation issue general insurance products in Australia?
In order for a general insurer to operate a general insurance business in Australia, it must comply with all obligations set out in the Insurance Act 1973 (Cth) and related regulations, as well as applicable prudential standards. Both the Australian Prudential Regulatory Authority (APRA) and the Australian Securities and Investments Commission (ASIC) are involved in regulating the industry.
The obligations related to the registration and authorisation process are covered in the module, including those relevant to:
- Non-operating holding company requirements
- Lloyd’s underwriter requirements
- Any conditions imposed by APRA
Once APRA has granted a general insurer approval to carry on a general insurance business, the general insurer must continue to comply with APRA’s prudential obligations. The prudential obligations covered in this module are:
- Ownership requirements
- Assets in Australia
- Maintenance of adequate capital
- Governance and establishment of a board
- Responsibility for capital management
- Prudential remuneration requirements
- Re-insurance management framework
- Complying with recapitalisation directions
- Timeframe requirements
The module also covers the requirements for the insurer to establish, maintain, update and review policies and procedures to ensure that:
- appropriate auditors are appointed, instructed and assisted in the performance of their duties
- an actuary is appointed to assist with financial modelling and the management of financial risk
- fit and proper personnel are employed and all staff are properly trained to understand their obligations and the obligations of the organisation
- a business continuity plan is developed
- outsourcing requirements are met
- APRA is consulted before entering into any offshoring arrangements
- all APRA reporting standards and required information about issued policies are provided to APRA
- obligations under the Financial Claims Scheme (FCS) are met
- applicable levies and the emergency services levy (NSW only) are paid, and
- APRA and ASIC are provided with access to its documents, employees and premises in response to any APRA investigation or request
Other types of insurance covered are:
- Marine insurance contracts
- Seafarer scheme of insurance
- Terrorism insurance
Finally, a number of codes of practice apply to general insurers or brokers that subscribe to those codes. This module covers the:
- General Insurance Code of Practice
- Insurance Premium Funding Code of Practice
- Insurance Brokers Code of Practice
- Motor Repair Industry Code of Conduct
Failure of a general insurer to meet its obligations may result in the general insurer facing both civil and criminal consequences. The actual consequence will depend on the specific obligation that is breached but can include:
- Imprisonment
- Financial penalties
- Appointment of a judicial manager to administer the organisation
- Revocation of the organisation’s authorisation to operate an insurance business
- Application for an injunction to restrain dealings within the organisation
- Accepting enforceable undertakings
- Making a declaration that compensation is payable for loss or damage.
The General Insurance module does not cover the rights or entitlements of individuals who have suffered damages or losses due to breaches of obligations by Australian insurance and financial services entities. The module does not cover the process that an entity or an individual would follow to report or seek compensation for the breach or their loss.
The General Insurance module provides the obligations specifically relating to applying for and maintaining the authority to carry on business as a general insurer and issue general insurance policies in Australia. It does not include the obligations related to obtaining and maintaining an Australian Financial Services licence which, while required by a general insurer, is the subject of the Australian Financial Services licence module.