Insurance Regulations 2002

Statutory Rules 2002 No. 103 as amended

made under the

Insurance Act 1973

This compilation was prepared on 1 July 2008
taking into account amendments up to SLI 2008 No. 125

Prepared by the Office of Legislative Drafting
Attorney-General’s Department, Canberra

Contents

Part 1 Preliminary 

 1 Name of Regulations [see Note 1]

 2 Commencement 

 3 Insurance Regulations 1974 — repeal 

 4 Definitions 

Part 2 Insurance contracts that are not insurance business             

 4A Application of Part 2

 4B Insurance contracts for high‑value insured 

 4C Insurance contracts for atypical risks 

 4D Insurance contracts for other risks that cannot reasonably be placed in Australia             

 4E Insurance contracts required by foreign laws 

Part 3 Insurance business to which the Act does not apply             

 5 Prescribed bodies corporate 

 6 Prescribed insurance business 

Part 4 Notice of commencement and cessation of insurance business             

 7 Notice of commencement and cessation of insurance business             

Part 5 Inspection of Register and auditors’ certificate             

 8 Applications under section 123 of the Act 

 9 Prescribed fee (Act s 123) 

 10 Copies of documents to be provided by APRA 

Part 6 Transitional 

 11 Application of prudential standards during transition period 

Schedule 1 Prescribed bodies corporate 

Schedule 2 Prescribed insurance business 

Notes  

Part 1 Preliminary

1 Name of Regulations [see Note 1]

  These Regulations are the Insurance Regulations 2002.

2 Commencement

  These Regulations commence on 1 July 2002.

3 Insurance Regulations 1974 — repeal

  The following Statutory Rules are repealed:

  1974 No. 141

  1976 Nos. 90, 126, 139 and 288

  1977 No. 213

  1980 No. 107

  1981 No. 209

  1985 No. 189

  1987 No. 340

  1990 No. 446

  1992 No. 177

  1994 No. 277

  1995 No. 140

  1996 Nos. 45 and 302

  1997 Nos. 172, 224, 235 and 369

  1998 Nos. 80 and 189

  2001 No. 71.

4 Definitions

  In these Regulations:

Act means the Insurance Act 1973.

unauthorised foreign insurer means an insurer:

 (a) that is either:

 (i) a body corporate incorporated in a foreign country; or

 (ii) an unincorporated body established under a law of a foreign country that:

 (A) under that law, may sue or be sued, or may hold property in the name of its secretary
or of an office holder of the body duly appointed for that purpose; and

 (B) does not have its head office or principal place of business in Australia; and

 (b) that immediately before 1 July 2008:

 (i) was not, and was not required to be, authorised under the Act to carry on insurance business in Australia; and

 (ii) was not exempt from subsection 9 (1), 10 (1) or 10 (2) of the Act by a determination made under subsection 7 (1) of the Act; and

 (c) to which subsection 9 (1), 10 (1) or 10 (2) of the Act would apply if this Part did not apply to the insurer; and

 (d) that is not an entity specified in regulation 12.

Part 2 Insurance contracts that are not insurance business

4A Application of Part 2

  This Part applies to a contract of insurance for which the insurer is, or is proposed to be, an unauthorised foreign insurer.

4B Insurance contracts for high‑value insured

 (1) For subsection 3A (1) of the Act, a contract of insurance under which at least 1 of the policyholders is a high‑value insured is specified.

 (2) For subregulation (1) a policyholder is a high‑value insured if the policyholder, alone or as part of a related group, meets the requirements of subregulation (3), (4) or (5).

 (3) A policyholder meets the requirements of this subregulation if the operating revenue of the policyholder derived in Australia for a financial year is at least $200 million, worked out by averaging the amount of its operating revenue derived in Australia for each of the previous 3 financial years.

 (4) A policyholder meets the requirements of this subregulation if the value of its gross assets in Australia at the end of a financial year is at least $200 million, worked out by averaging the value of those assets at the end of each of the previous 3 financial years.

 (5) A policyholder meets the requirements of this subregulation if the number of the employees of the policyholder in Australia at the end of a financial year is at least 500, worked out by averaging the number of its employees in Australia at the end of each of the previous 3 financial years.

 (6) If the policyholder was not in existence at the end of each of the previous 3 financial years, its revenue, assets and employees are worked out for the purposes of subregulations (3), (4) and (5) by reference to the most recent completed financial years in which it was in existence.

 (7) For this regulation:

policyholder means a person that has or proposes to have a contract of insurance with an unauthorised foreign insurer.

related group means:

 (a) 2 or more associated entities (within the meaning given by section 50AAA of the Corporations Act 2001); or

 (b) a partnership.

4C Insurance contracts for atypical risks

 (1) For subsection 3A (1) of the Act, a contract of insurance for an atypical risk is specified.

 (2) For subregulation (1), a contract of insurance for an atypical risk is a contract of insurance under which any of the following is insured against:

 (a) loss or liability arising from the hazardous properties (including radioactive, toxic or explosive properties) of nuclear fuel, nuclear material or nuclear waste;

 (b) loss or liability arising from the hazardous properties of biological material or biological waste;

 (c) loss or liability arising from war or warlike activities (within the meaning given by subregulation 2 (1) of the Insurance Contracts Regulations 1985);

 (d) loss or liability arising from a terrorist act (within the meaning given by section 5 of the Terrorism Insurance Act 2003);

 (e) liability arising from health‑care related research;

 (f) loss of, or liability arising from the operation of, a space object (within the meaning given by section 8 of the Space Activities Act 1998);

 (g) liability arising from the ownership or operation of an aircraft (but not loss of the aircraft or its cargo);

 (h) liability and expenses arising from a person owning, chartering, managing, operating or being in possession of a vessel other than a pleasure craft (within the meaning given by subsection 9A (2) of the Insurance Contracts Act 1984);

 (i) loss or liability arising from equine mortality or fertility and related risks;

 (j) loss or liability incidental to a loss or liability mentioned in paragraphs (a) to (i).

 (3) However, a contract of insurance under which:

 (a) a loss or liability mentioned in subregulation (2); and

 (b) a loss or liability of 1 or more other kinds;

are insured against is only a contract of insurance for an atypical risk to the extent that it insures against the loss or liability mentioned in subregulation (2).

 (4) Also, an equestrian package is not a contract of insurance for an atypical risk.

Note   An equestrian package is an insurance policy that covers risks such as personal injuries and veterinary fees associated with the ownership or use of a horse and loss of or damage to saddlery, tack and horse floats.

4D Insurance contracts for other risks that cannot reasonably be placed in Australia

 (1) For subsection 3A (1) of the Act, a contract of insurance is specified if an Australian insurance broker certifies in writing that the risk insured under that contract cannot reasonably be placed with an Australian insurer.

 (2) In deciding whether the risk insured under that contract cannot reasonably be placed with an Australian insurer, the Australian insurance broker must be satisfied, on reasonable grounds, that:

 (a) there is no Australian insurer that will insure against the risk; or

 (b)  the terms (including price) on which any Australian insurer will insure against the risk are substantially less favourable to the insured than the terms on which the unauthorised foreign insurer will insure against the risk; or

 (c) insurance with an Australian insurer would be substantially less favourable to the insured than with
an unauthorised foreign insurer because of other circumstances.

Example for paragraph (c)  

The insured and the unauthorised foreign insurer have a pre‑existing relationship, and the maintenance of that relationship will have significant benefits for the insured.

 (3) The Australian insurance broker must make reasonable inquiries about the matters mentioned in subregulation (2).

 (4) The Australian insurance broker must keep written records of:

 (a) its inquiries into the matters mentioned in subregulation (2); and

 (b) its reasons for being satisfied of those matters.

 (5) If requested by the insured, the Australian insurance broker must give a copy of the certificate under subregulation (1) to the insured.

Note   Failure by an Australian insurance broker to properly discharge the obligations in this regulation may be a matter affecting the financial services licence of that broker. See generally Part 7.6 of the Corporations Act 2001.

 (6) In this regulation:

Australian insurance broker means a person that holds an Australian financial services licence (within the meaning given by the Corporations Act 2001), and who is permitted under section 923B of that Act to assume or use the expression insurance broker or general insurance broker in relation to the person’s business or services.

Australian insurer means a person authorised or permitted under the Act (including by way of a determination under subsection 7 (1) of the Act) to carry on insurance business in Australia.

4E Insurance contracts required by foreign laws

  For subsection 3A (1) of the Act, a contract of insurance is specified if a law of a foreign country requires that the contract be issued by an insurer, or a kind of insurer, authorised or permitted under the laws of that country to issue that kind of contract.

Part 3 Insurance business to which the Act does not apply

5 Prescribed bodies corporate

  For paragraph 5 (2) (b) of the Act, the bodies corporate mentioned in Schedule 1 are prescribed.

6 Prescribed insurance business

  For paragraph 5 (2) (c) of the Act, the insurance business mentioned in Schedule 2 is prescribed.

Part 4 Notice of commencement and cessation of insurance business

7 Notice of commencement and cessation of insurance business

 (1) A body corporate authorised under the Act to carry on insurance business in Australia must tell APRA, in writing, of the date on which it started to carry on the business within 7 days after that date.

Penalty:   5 penalty units.

 (2) A body corporate authorised under the Act to carry on insurance business in Australia must tell APRA, in writing, of the date on which it ceases to carry on the business within 7 days after that date.

Penalty:   5 penalty units.

Part 5 Inspection of Register and auditors’ certificate

8 Applications under section 123 of the Act

  An application under section 123 of the Act must be made in writing.

9 Prescribed fee (Act s 123)

  For subsection 123 (1) of the Act, the prescribed fee is $10.

10 Copies of documents to be provided by APRA

 (1) If a person:

 (a) asks APRA to give the person a copy of the whole or part of a document mentioned in section 123 of the Act; and

 (b) pays the fee worked out in accordance with subregulation (2);

APRA must give the person the copy.

 (2) The fee payable under subregulation (1) is:

 (a) $1 for each page of the copy; and

 (b) if, at the request of the person, the copy is made available in electronic form and the fee is payable for a document, or documents, for a single financial year in relation to a body corporate authorised under the Act to carry on insurance business — not more than $60.

Part 6 Transitional

11 Application of prudential standards during transition period

 (1) For item 11 of Schedule 2 to the Reform Act, this regulation applies to a body corporate that, within 14 days before commencement:

 (a) was authorised under the old Act to carry on insurance business; or

 (b) had been granted an exemption under section 37 of the old Act.

 (2) APRA may, on application by the body corporate, make a declaration in accordance with this regulation that applies to the body corporate for a specified period (the exemption period) in the transition period.

 (3) APRA may make a declaration only if APRA is satisfied that the consequences of the body corporate being required to comply with the standard or provision in the exemption period would be unreasonable.

 (4) A prudential standard or a provision of a prudential standard specified by a declaration does not apply to the body corporate during the exemption period.

 (5) For subregulation (2), an application must:

 (a) be in writing; and

 (b) state:

 (i) that it is made for this regulation; and

 (ii) the standard or provision for which the application is made; and

 (iii) the reasons for the application.

 (6) APRA may withdraw a declaration if it ceases to be satisfied about the matter mentioned in subregulation (3).

 (7) A declaration or a withdrawal of a declaration must:

 (a) be in writing; and

 (b) be given to the body corporate.

 (8) In this regulation:

commencement has the same meaning as in item 1 of Schedule 2 to the Reform Act.

old Act has the same meaning as in item 1 of Schedule 2 to the Reform Act.

Reform Act means the General Insurance Reform Act 2001.

transition period has the same meaning as in item 1 of Schedule 2 to the Reform Act.

12 Transitional arrangements for entities seeking authorisation

 (1) For subitem 7 (1) of Schedule 2 to the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007, the following entities are specified for the period specified in subregulation (2):

 (a) an entity that:

 (i) is a body corporate; and

 (ii) was carrying on insurance business before 1 July 2008; and

 (iii) applied for an authorisation under subsection 12 (1) of the Act, and paid any fees associated with the application, before 1 July 2008;

 (b) a body corporate that is an associated entity (within the meaning given by section 50AAA of the Corporations Act 2001) of an entity described in paragraph (a).

 (2) For subregulation (1), the period starts on 1 July 2008 and ends on the earliest of:

 (a) if APRA authorises the entity mentioned in paragraph
(1) (a) — the start of the day on which authorisation takes effect; and

 (b) if APRA decides not to authorise the entity mentioned in paragraph (1) (a) — the start of the day on which APRA’s decision takes effect; and

 (c) the end of 31 December 2008.

 (3) For subparagraph (1) (a) (ii), insurance business has the meaning given in subsection 3 (1) of the Act as in force on and after 1 July 2008.

Schedule 1 Prescribed bodies corporate

(regulation 5)

 1. The Export Finance and Insurance Corporation established by the Export Finance and Insurance Corporation Act 1991.

 2. Coal Mines Insurance Pty Limited, a company incorporated in New South Wales.

 3. The Motor Vehicle Insurance Trust constituted under the Motor Vehicle (Third Party Insurance) Act 1943 of Western Australia.

 4. A body, not being a company, established or constituted under a law of the Commonwealth or of a State or Territory that is required under a law of the Commonwealth or of a State or Territory to carry on any business of insurance or to undertake liability under a contract of insurance.

Schedule 2 Prescribed insurance business

(regulation 6)

 1. Workers compensation insurance business carried on by a company that is:

 (a) licensed under Division 3 of Part 7 of the Workers Compensation Act 1987 of New South Wales; and

 (b) required under that Act to establish and maintain statutory funds.

 2. The carrying on by the Municipal Association of Tasmania of the business of fidelity guarantee insurance.

 3. The carrying on by the Municipal Association of Victoria of the following kinds of insurance business:

 (a) fidelity guarantee insurance;

 (b) personal accident insurance.

 4. Insurance business carried on by an unauthorised foreign insurer relating to a contract of insurance that meets the following criteria:

 (a) the contract was entered into before 1 July 2008;

 (b) the contract has not been renewed or extended beyond its original term on or after 1 July 2008;

 (c) the terms of the contract have not been varied on or after 1 July 2008.

 5. Insurance business:

 (a) that is carried on by an unauthorised foreign insurer that is an entity specified in subregulation 12 (1); and

 (b) that relates to a contract of insurance that meets the following criteria:

 (i) the contract was entered into before the end of the period under subregulation 12 (2) relating to the insurer;

 (ii) the contract has not been renewed or extended beyond its original term after the end of that period;

 (iii) the terms of the contract have not been varied after the end of that period.

Notes to the Insurance Regulations 2002

Note 1

The Insurance Regulations 2002 (in force under the Insurance Act 1973) as shown in this compilation comprise Statutory Rules 2002 No. 103 amended as indicated in the Tables below.

Under the Legislative Instruments Act 2003, which came into force on
1 January 2005, it is a requirement for all non‑exempt legislative instruments to be registered on the Federal Register of Legislative Instruments.

Table of Statutory Rules

Table of Amendments