APRA statement on direct offshore foreign insurers
(DOFIs) and discretionary mutual funds (DMFs)
The Minister for Revenue and Assistant Treasurer announced on 3 May 2007 a
package of measures to enhance the integrity of the general insurance market in
Australia. The Minister’s announcement has implications for the insurance industry
and for buyers of insurance, and also for APRA and its prudential supervision of the
insurance industry in Australia.
The Minister announced that DOFIs will become subject to prudential regulation,
through amendments to the Insurance Act 1973 (Insurance Act) that will extend the
definition of 'carrying on insurance'. The Government intends that anyone carrying
on insurance business in Australia, either directly or through the actions of
another, must become an authorised insurer. As a result, the Insurance Act will
apply to DOFIs, including ‘captives’, foreign insurers and foreign reinsurers
operating in Australia as APRA-authorised branches or subsidiaries, domestic
insurers and domestic reinsurers.
The effect of these amendments is that DOFIs will need to become authorised by
APRA to carry on business in Australia.
APRA’s existing enforcement powers will be enhanced to enable investigation of
breaches. Persons who breach the requirement to be authorised will be liable to
Limited exemptions will apply to enable Australia’s largest businesses and those
unable to obtain appropriate cover domestically to retain access to international
insurance markets. Exemptions will also be available for specialised risks that
cannot be underwritten in Australia. The prudential requirements for Lloyd’s
underwriters will not change.
The Government also intends that offshore foreign reinsurers will not be required
to be authorised in Australia. They may, however, be indirectly affected by the
regulatory regime through amendments to the prudential standards that apply to