The Minister for Financial Services & Regulation, Joe Hockey welcomed the passage of the landmark General Insurance Reform Bill through the Parliament today.
"This is a total overhaul of the Insurance Act 1973 and will make the general insurance industry more robust and ultimately, competitive," the Minister said.
"This Bill will help restore public confidence in an industry whose image has been tarnished by the collapse of HIH."
The Bill:
- will require all authorised insurers to meet new risk based capital requirements and a minimum new entry capital requirement of $5 million (raised from the current level of $2 million).
- introduce a risk based approach to capital adequacy for general insurers, similar to current banking regulation
- amends the Insurance Act to provide APRA with a power to make, vary and revoke prudential standards;
- expands the coverage of the Insurance Act to include, the non-operation holding company of a general insurer, and a general insurer's subsidiaries;
- expands the fit and proper tests to apply to general insurer's board and senior management, and other related bodies;
- requires a general insurer, to appoint an APRA-approved actuary to value an insurer's insurance liabilities;
- expands the obligations on auditors and actuaries to report to APRA;
- gives APRA more powers to undertake enforcement actions and improves the workability of these enforcement provisions;
It is proposed that the new regime will begin in July 2002. Industry would be required to comply under the new regime immediately except for meeting the new minimum capital requirements. Incumbent insurers will have until July 2004 to meet these requirements.