Explanatory Memorandum
(Circulated by authority of the Treasurer,the Hon Peter Costello, MP)7 - Schedule 4 Amendments relating to general insurance
Insurance Act 1973
7.1 This amendment ensures that a person is a disqualified person for the purposes of the Insurance Act 1973 (the Insurance Act) if a person has breached of the Corporations Act 2001 or its foreign equivalent. This is particularly relevant at a non-operating holding company (NOHC) level where the board may have directors with no financial sector background but who may have been involved in breaches of corporate law in commercial firms in the past either in Australia or abroad. Such directors would be undesirable on the board or management of an authorised NOHC.
Items 2 and 3
7.2 These amendments allow APRA to determine that a person who is not fit and proper, as set out in a prudential standard, is also a disqualified person of the purposes of section 24. This amendment brings the Insurance Act into line with the Superannuation and Industry (Supervision) Act 1993 .
7.3 It is an offence under section 24 for a disqualified person to act as a director or senior manager of a general insurance company NOHC authorised under the Insurance Act. It is also an offence under section 24 for a body corporate that allows a disqualified person to act in such a role.
7.4 Section 25 sets out when a person is a disqualified person for the purposes of section 24.
Item 4
7.5 This amendment allows APRA to impose conditions on a determination made under section 26. Section 26 allows APRA to determine that a person is not a disqualified person. In some circumstances, APRA may be prepared for persons who would otherwise be disqualified to continue to act in specific roles under specific conditions. By allowing a determination to be made subject to conditions that may be varied or revoked, APRA has more flexibility in the application of this section.
Item 5
7.6 This amendment corrects inconsistent terminology in the Insurance Act and clarifies that there may be a certain amount of negotiation between APRA and an insurer in determining an appropriate in-house capital adequacy model.
Items 6, 7 and 8
7.7 This amendment provides APRA with the power to vary or revoke a modification or replace a modification with a further modification made under subsection 32(3A). Subsection 32(3A) allows APRA to modify a prudential standard to replace the capital adequacy standard which applies to all general insurers with an in-house capital model specific to a particular institution.
Item 9
7.8 This amendment requires APRA to consult before modifying a prudential standard. The amendment is designed to ensure consistency with the existing requirements for APRA to consult general insurers, NOHCs, subsidiaries and other bodies when making or varying a prudential standard.
Item 10
7.9 This amendment clarifies that APRA may revoke an approval of a persons appointment under section 40 (Approval of an appointment of an auditor or actuary) if that person has failed to perform adequately and properly the functions and duties of what the person was required to perform under the Act rather than simply the duties of the appointment under the Insurance Act.
Item 11
7.10 This amendment repeals paragraph 43(a) which is redundant as a result of subsections 42(1) and 44(2).
Items 12 and 13
7.11 These amendments harmonise and add clarity to the wording of section 49N bringing it into line with section 49M.
Items 14 and 15
7.12 These items amend the Insurance Act so that a person who is connected to a general insurer or related group is not allowed to sit as a member of the Administrative Appeals Tribunal for the purposes of a review of a reviewable decision of the Treasurer or APRA made under the Insurance Act.
Item 16
7.13 This amendment clarifies section 117 so that when a foreign general insurer gives written notice to APRA of its address for service, that address will also be taken to be the address for service for its subsidiaries unless notified to the contrary.
Item 17
7.14 This amendment clarifies section 118 so that when a foreign general insurer gives written notice to APRA of its agents name and, in the case of an appointment, the place of residence of that person, that name and address will also be taken to be the name and address of the agent for subsidiaries unless notified to the contrary.
General Insurance Reform Act 2001
7.15 This amendment corrects a drafting error.
Commencement
7.16 Items 1 to 17 are to commence immediately after the commencement of Schedule 1 to the General Insurance reform Act 2001. Item 18 is to commence immediately after the commencement of Schedule 2 to the General Insurance Reform Act 2001.