Insurance Determination No. 1 of 2015
Insurance Act 1973
I, Ian Laughlin, a delegate of APRA, under paragraph 7(1)(a) of the Insurance Act 1973 (the Act), DETERMINE that paragraph 28(a) of the Act does not apply to a general insurer who expects to recover an amount under a contract of reinsurance entered into with a non-APRA-authorised reinsurer or a Lloyd’s underwriter.
Under paragraph 7(2)(c) of the Act, this determination is made subject to the conditions set out in the attached Schedule.
This determination comes into force on 1 July 2015 and remains in force indefinitely.
Dated: 17 June 2015
In this instrument:
APRA means the Australian Prudential Regulation Authority.
APRA-authorised reinsurer means a general insurer carrying on reinsurance business, including a Lloyd’s underwriter if it carries on reinsurance business.
general insurer has the meaning given in section 11 of the Act
Lloyd's means the society of that name incorporated by the Act of the United Kingdom known as Lloyd's Act 1871.
Lloyd’s underwriter means an underwriting member of Lloyd’s.
non-APRA-authorised reinsurer means any reinsurer that is not an APRA-authorised reinsurer.
Note 1 Under subsection 7(2) of the Act, the determination may be expressed to apply to a particular person or to a class of persons, specify the period during which the determination is in force and be made subject to specified conditions.
Note 2 Under subsection 7(2A) of the Act, if APRA makes a determination that applies to a particular person, APRA must also give the person written notice of the determination.
Note 3 Under subsection 7(3) of the Act, APRA may, in writing, vary or revoke a determination under section 7.
Note 4 Under subsection 7(4) of the Act, a determination that applies to a particular person and an instrument varying or revoking a determination that applies to a particular person are not legislative instruments. Any other instrument made under section 7 of the Act is a legislative instrument (subsection 7(5)).
Note 5 Under paragraphs 7(6)(b) and (c) of the Act, Part VI applies to a decision to impose conditions on, or specify a period in, a determination made under section 7 in relation to a particular person, and a decision to vary or revoke a determination made under section 7 in relation to a particular person, respectively.
Note 6 Under subsection 7A(1) of the Act, a person commits an offence if:
(a) the person does an act or fails to do an act; and
(b) doing the act or failing to do the act results in a breach of a condition to which a determination in force under subsection 7(1) is subject; and
(c) the determination applies to the person.
Note 7 Under subsection 7A(2) of the Act, an offence against section 7A is an offence of strict liability. A penalty of 60 penalty units applies or by virtue of subsection 4B(3) of the Crimes Act 1914, in the case of a body corporate, a penalty not exceeding 300 penalty units.
Note 8 Section 128A of the Act applies to an offence under section 7A. Under subsection 128A(2), if APRA considers that a person has done an act or failed to do an act in circumstances that give rise to the commission of an offence to which section 128A applies, APRA may give the person a written notice that APRA considers the person may have committed the offence. Under subsection 128A(3), a person:
(a) who does an act or fails to do an act in circumstances that give rise to the commission of an offence to which section 128A applies; and
(b) receives a notice under subsection 128A(2) in respect of the offence;
also commits the offence in respect of each day, after the person receives the notice, on which the circumstances that gave rise to the commission of the offence continue (including the day of conviction for the offence or any later day).
Schedule – Conditions imposed on this determination
1. The general insurer must at all times hold assets in Australia of a value that is equal to or greater than the total amount of its liabilities in Australia (other than its pre-authorisation liabilities).
2. For the purposes of condition 1, only the value of the following assets are counted towards the value of the general insurer’s assets in Australia:
(a) assets which comprise assets in Australia (excluding goodwill and any assets or other amount excluded by the prudential standards for the purposes of section 28 of the Act);
(b) reinsurance recoverables due from Lloyd’s underwriters under contracts of reinsurance that do not comply with paragraph 116A(1)(c) of the Act, where the liabilities under these contracts are required to be covered by the Lloyd’s underwriters under a designated security trust fund; and
(c) reinsurance recoverables due from non-APRA-authorised reinsurers under contracts of reinsurance that do not comply with paragraph 116A(1)(c) of the Act and are supported by recognised collateral, guarantees or letters of credit that comply with the requirements in Attachment B of Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge.
In this Schedule:
designated security trust fund has the meaning given in section 69 of the Act.
pre-authorisation liability means a liability, contingent or otherwise, that is assumed (whether in Australia or elsewhere) by a body corporate that, after assuming the liability, becomes authorised under section 12 of the Act to carry on insurance business in Australia.
reinsurance recoverables has the meaning given in paragraph 4 of Prudential Standard GPS 001 Definitions.