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INSURANCE REGULATIONS (AMENDMENT) 1998 NO. 189
EXPLANATORY MEMORANDUMStatutory Rules 1998 No. 189
Minute No. 189 of 1998 - Treasurer
Subject - Insurance Act 1973
Insurance Regulations (Amendment)
The Insurance Act 1973 (the Act) and the Insurance Regulations (the Principal Regulations) establish a scheme for prudential supervision of the general insurance industry.
Section 132 of the Act provides that the Governor-General may make Regulations, not inconsistent with the Act, prescribing all matters that are required or permitted by the Act to be prescribed or are necessary or convenient to be prescribed for carrying out or giving effect to the Act.
The proposed regulations contain:
* amendments which are consequential to the Financial Sector Reform
legislation, for example:
- replacing references to the Insurance and Superannuation Commissioner
with references to the Australian Prudential Regulation Authority and the
Australian Securities and Investments Commission, as appropriate
(proposed Regulations 4, 5, 8, 10.3, 11-14);
- omitting regulations which will have no function after the commencement
of the Financial Sector Reform legislation (proposed Regulations 15-17);
* amendments which are consequential to the proposed Managed Investments Act
1998:
- replacing references to prescribed interests in a regulation with references
to interests in managed investment schemes (proposed Regulation 9.2 and
9.3); and
* several miscellaneous amendments of a minor, technical nature, for example:
- amending the definition of 'the forms determination' (proposed Regulation 3);
- omitting a regulation prescribing the business hours for the office of the Insurance and Superannuation Commissioner (proposed Regulation 6).
The Financial Sector Reform legislation is the Government's response to the report of the Financial System Inquiry (the Wallis Committee) and includes the Australian Prudential Regulation Authority Act 1998, the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998 and the Financial Sector Reform (Consequential Amendments) Act 1998.
To the extent that it is relevant to the amendments to the Insurance Regulations, the Financial Sector Reform legislation:
* abolishes the Insurance and Superannuation Commissioner;
* establishes the Australian Prudential Regulation Authority to undertake the prudential regulation of deposit-taking institutions, insurance companies and superannuation entities; and
* enlarges the role of the Australian Securities Commission, which is renamed the Australian Securities and Investments Commission, so that it oversees consumer protection and market integrity in the financial sector (including superannuation and insurance).
The current role of the Insurance and Superannuation Commissioner is thus divided. between the Australian Prudential Regulation Authority and the Australian Securities and Investments Commission. In addition, these bodies will receive certain functions previously carried out by the Reserve Bank and Australian Competition and Consumer Commission respectively.
Proposed Regulations 9.2 and 9.3 will commence on the commencement of the proposed Managed Investments Act 1998. The other proposed Regulations will commence on 1 July 1998.
The Office of Regulation Review has advised that no Regulation Impact Statement is required in relation to these regulations. Details of the proposed regulations are attached - Attachment A. The Minute recommends that the Regulations be made in the form proposed.
Authority: Section 132 of the Insurance Act 1973.
ATTACHMENT A
Insurance Regulations
Proposed Regulation 1 - Commencement
Proposed Subregulation 1.2 provides that Subregulation 9.2 and 9.3 commence on the commencement of the Managed Investments Act 1998.
The other proposed regulations commence on 1 July 1998 (proposed Subregulation 1.1).
Proposed Regulation 2 - Amendment
Proposed Regulation 2 provides that the Insurance Regulations are to be amended as set out in these Regulations.
Proposed Regulation 3 -Regulation 2 (Interpretation)
This proposed regulation amends regulation 2 by:
* Omitting the definition of 'the forms determination'; and
* inserting a new definition of 'the forms determination'.
The proposed regulation amends the definition of 'the forms determination' under regulation 2. The previous definition refers to the determination made by the Commissioner on 26 September 1997, which is no longer in force. The determination in force is Determination No. 1 of 1998, made by the Commissioner on 1 May 1998.
Part 1V of the Act sets out the requirements concerning the accounts of authorised insurers, and Part IVA sets out the requirements concerning the accounts of certain bodies corporate. Among other things, the provisions in these Parts require authorised insurers and supervised bodies corporate to lodge yearly accounts and statements and quarterly statements with the Commissioner. These play an important role in the Commissioner's assessment of the solvency of the authorised insurers.
Part IV allows the Commissioner to determine, by disallowable instrument, the forms of accounts and statements to be lodged by authorised insurers. Part IVA includes a similar provision allowing the Commissioner to determine, by disallowable instrument, the forms of accounts and statements to be lodged by supervised bodies corporate.
The Principal Regulations refer to some of these forms by number, and this necessitates a reference to the determination of the Commissioner which is in force. The Commissioner determined the form of accounts and statements to be lodged by authorised insurers and supervised bodies corporate on 1 May 1998. The instrument of determination, No 1 of 1998, was tabled in both Houses of Parliament on 14 May 1998 and was gazetted on 20 May 1998, as required for disallowable instruments by the Acts Interpretation Act 1901. The instrument determines the form of yearly accounts and statements to be lodged in respect of the financial year of authorised insurers and supervised bodies corporate ending on or after 31 December 1997, the form of quarterly statements to be lodged by them in respect of quarters ending on or after 31 March 1998, and the form of yearly statements of reinsurance activity to be lodged by authorised insurers in respect of a treaty year which ends on or after 1 July 1998.
The proposed regulations amend the Principal Regulations by amending the interpretation of 'the forms determination' so that it refers to the most recent determination of the Commissioner, that is: Determination No. 1 of 1998 made by the Commissioner on 1 May 1998.
Proposed Regulation 4. 5. 8. 10.3. 11. 14 - Regulations 3A, 3C, 5A, 7(2), 8, 12A, 26, 29 (References to the Insurance and Superannuation Commissioner)
As indicated above, the Australian Prudential Regulation Authority (APRA) will take over the prudential regulation of those bodies previously supervised by the Insurance and Superannuation Commissioner while the Australian Securities and Investments Commission (ASIC) will oversee consumer protection and market integrity in relation to those bodies and other parts of the financial sector.
For this purpose, the legislation previously administered by the Insurance and Superannuation Commissioner has been examined and provisions assigned to the relevant new regulator in the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998.
Regulations 5A, 7(2), 8, 12A, 26 and 29 relate to matters which are assigned to APRA. The proposed amendments will therefore change the appropriate references from the Insurance and Superannuation Commissioner to references to APRA (proposed Regulations 8, 10.3, 11-14).
Regulations 3A and 3C relate to matters which are of relevance to both APRA and ASIC. The proposed amendments will therefore change the appropriate references in these regulations from the Insurance and Superannuation Commissioner to refer to both APRA and ASIC (proposed Regulations 4 and 5).
Proposed Regulation 6 (Business hours for offices of the Commissioner)
Current Regulation 4 prescribes the hours at which offices of the Insurance and Superannuation Commissioner will be open for business.
This is overly prescriptive and it is proposed that the regulation be omitted.
Proposed Regulation 7 (Particulars about applicants)
Regulation 5 lists the information which must be lodged when applying for authority to carry on a general insurance business.
It includes, in subparagraph 5(c)(vi), certain named accounts required to be given to the Australian Securities Commission under the Corporations Law.
It is proposed that the reference to the Australian Securities Commission in this regulation be amended to refer instead to the Commission's new name, the Australian Securities and Investments Commission. The change of name is made by Item 4, Schedule 1 of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998.
Proposed Regulation 9 - Regulation 6 (Particulars - proposed auditors of applicants)
Regulation 6 refers to the particulars required of a proposed auditor.
This includes, in paragraph 6(1)(c), whether the person is a 'registered company auditor in any State or Territory' and if so, which jurisdictions.
Under the Corporations Law, a registered company auditor is registered for all States and Territories.
It is therefore proposed to amend this Regulation to instead ask simply whether the person is a registered company auditor.
The Regulation also requires disclosure of the interests in the company which the proposed auditor has. Consistently with amendments included in the proposed Managed Investments Act 1998, it is proposed that the references to prescribed interests be omitted and replaced by references to interests in managed investment schemes (proposed Regulations 9.2 and 9.3).
As indicated above, these amendments commence at the same time as the proposed Managed Investments Act 1998.
Proposed Regulation 10.1, 10.2 - Regulation 7 (Documents to be lodged with applications)
Regulation 7 relates to the documents to be lodged with an application for authority to carry on a general insurance business.
It includes:
* a certificate of registration as a foreign company issued to the applicant in each
State or Territory in which it is so registered (subparagraph 7(1)(a)(ii)) and
* if the applicant is incorporated overseas, a photocopy of the certificate of
registration as a foreign company issued to the applicant in each State or
Territory in which it is registered as a foreign company (subparagraph 7(1)(b)).
It is proposed that the first requirement noted above, which is no longer appropriate, be omitted and a requirement that the applicant lodge a statement of any State or Territory where the applicant intends to carry on business be substituted (proposed Regulation 10.1)
It is proposed that the second requirement be amended to recognise that only one registration is necessary (proposed Regulation 10.2).
Proposed Regulation 15-17 - Regulations 30 to 32 (prescription of agencies for the purpose of the secrecy provision)
Section 126 of the Insurance Act 1973 relates to secrecy.
Regulations 30 to 32 prescribed particular financial sector supervisory agencies, law enforcement agencies and overseas financial sector supervisory agencies for the purpose of section 126.
Section 126 has been repealed by Item 93, Schedule 9 of the Financial Sector Reform (Amendments and Transitional Provisions) Act 1998.
It is therefore proposed that Regulations 30 to 32 be omitted.