Direct offshore foreign insurers must be authorized by Australia’s regulator prior to June 2008

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 new authorization requirements for foreign insurers that come into effect on July 1, 2008.
Under legislative changes in September 2007, DOFIs wishing to continue operating in the Australian market must be authorized by APRA.
“The new authorization requirements are designed to ensure Australian policyholders have the security of Australia’s strong prudential regime for general insurers and are protected from dealing with unauthorized DOFIs that would not meet the standards required of an APRA-authorized insurer,” APRA announced in a press release.
Some business will still be able to be placed with DOFIs that are not authorized, as long as this business is placed in accordance with the new legislation’s exemption regime.
The three exemption categories include:
high-valued insureds (i.e. corporations, partnerships or trusts that have total group gross operating revenue in Australia of AUD$200 million or more);
atypical risks (i.e. nuclear, war, terrorism); or
customized insurance (situations in which there is a lack of market capacity, for example).
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 authorization if they plan to write insurance business in Australia after 1 July 2008 so that the authorization process can commence,” Trowbridge said.
“Those overseas insurers that provide a substantial application for authorization by 31 May 2008 will be allowed to continue operating as DOFIs for a limited transition period after 1 July [if] 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 authorization and continue to write business not covered by the exemption provisions after 1 July 2008.”