General Insurance Reform Act 2001
Act No. 119 of 2001 as amended
This compilation was prepared on 18 July 2005
[This Act was amended by Act No. 37 of 2002; No. 100 of 2005]
Amendment from Act No. 37 of 2002
[Schedule 4 (item 18) amended item 5 of Schedule 2
Schedule 4 (items 18) commenced immediately after 19 September 2001]
Amendment from Act No. 100 of 2005
[Schedule 2 (item 19) amended item 41B of Schedule 1
Schedule 2 (item 19) commenced immediately after 1 July 2002]
Prepared by the Office of Legislative Drafting and Publishing,
Attorney-General’s Department, Canberra
Contents
1 Short title
2 Commencement
3 Schedule(s)
Schedule 1—Amendment of the Insurance Act 1973
Schedule 2—Transitional provisions
Schedule 3—Consequential amendment of other Acts
Australian Prudential Regulation Authority Act 1998
Australian Securities and Investments Commission Act 2001
Corporations Act 2001
Financial Sector (Collection of Data) Act 2001
Financial Transactions Reports Act 1988
Insurance Acquisitions and Takeovers Act 1991
Seafarers Rehabilitation and Compensation Act 1992
An Act to amend the Insurance Act 1973, and for related purposes
[Assented to 19 September 2001]
1 Short title
This Act may be cited as the General Insurance Reform Act 2001.
2 Commencement
(1) Subject to this section, this Act commences on the day on which it receives the Royal Assent.
(2) Schedules 1 and 3 to this Act commence, or are taken to have commenced, on 1 July 2002.
3 Schedule(s)
Subject to section 2, each Act that is specified in a Schedule to this Act is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this Act has effect according to its terms.
Schedule 1—Amendment of the Insurance Act 1973
1 After section 2
Insert:
2A Main object of this Act
(1) The main object of this Act is to protect the interests of policyholders and prospective policyholders under insurance policies (issued by general insurers and Lloyd’s underwriters) in ways that are consistent with the continued development of a viable, competitive and innovative insurance industry.
(2) This Act, and the prudential standards determined by APRA under this Act, achieve this mainly by:
(a) restricting who can carry on insurance business in Australia by requiring general insurers, and the directors and senior management of general insurers, to meet certain suitability requirements; and
(b) imposing primary responsibility for protecting the interests of policyholders on the directors and senior management of general insurers; and
(c) imposing on general insurers requirements to promote prudent management of their insurance business (including requirements concerning capital adequacy, the valuation of liabilities, reinsurance arrangements and the effectiveness of risk management strategies and techniques); and
(d) providing for the prudential supervision of general insurers by APRA.
(3) Generally, the provisions of this Act apply to general insurers. However, there are a number of special provisions that apply only to Lloyd’s underwriters.
2 Subsection 3(1) (definition of actuary)
Repeal the definition.
3 Subsection 3(1)
Insert:
authorised…
Overview
The General Insurance Reform Act 2001 was enacted to address the need for a more robust and transparent regulatory framework for the insurance industry in Australia. The Act amends the Insurance Act 1973 to enhance the protection of policyholders while promoting a competitive and innovative insurance sector. The main objective of the Act is to safeguard policyholder interests through stringent requirements for general insurers and Lloyd’s underwriters, including suitability criteria for directors and senior management, capital adequacy, and risk management. Additionally, the Act establishes the Australian Prudential Regulation Authority (APRA) to supervise general insurers, imposing primary responsibility on the directors and senior management to protect policyholder interests. It also includes provisions for authorisation, authorisation conditions, and the revocation of authorisations, ensuring that insurers meet prudential standards and comply with regulatory requirements. The Act is intended to maintain stability in the Australian financial system while fostering an environment conducive to the development of a viable insurance industry.
Scope and Application
The General Insurance Reform Act 2001 is an Australian federal act that amends the Insurance Act 1973 and other related Acts, primarily to enhance the regulation of the insurance industry. The Act applies to general insurers, which are defined as body corporates authorised to carry on insurance business in Australia, and Lloyd's underwriters. It also applies to directors, senior managers, and other representatives of these entities. The Act establishes a framework for the authorisation, supervision, and monitoring of general insurers and Lloyd's underwriters, with a focus on protecting policyholders and maintaining financial stability. The Australian Prudential Regulation Authority (APRA) is the primary regulator under this Act, responsible for authorising insurers, setting prudential standards, and enforcing compliance. The Act includes provisions for the imposition of conditions on authorisations, the revocation of authorisations, and the appointment and oversight of auditors and actuaries. It also sets out offences and penalties for non-compliance, with some offences carrying strict liability provisions. The Act extends to the Commonwealth, external Territories, and applies to certain prescribed entities. Subordinate instruments can extend or restrict its application.
Key Provisions
- The General Insurance Reform Act 2001 (C2004A00885) primarily seeks to protect the interests of policyholders and prospective policyholders under insurance policies issued by general insurers and Lloyd’s underwriters. It achieves this through several mechanisms, including the imposition of suitability requirements for those carrying on insurance business, the assignment of primary responsibility to directors and senior management for protecting policyholders’ interests, and the imposition of various requirements on general insurers to promote prudent management. The Act also provides for the prudential supervision of general insurers by the Australian Prudential Regulation Authority (APRA).
- The Act imposes several obligations on the entities it governs. For example, it requires general insurers to hold sufficient assets in Australia to cover their liabilities, and mandates that they must not carry on insurance business in Australia unless they are authorised to do so. The Act also imposes conditions on the authorisation of general insurers and Lloyd’s underwriters, and sets out the process for applying for such authorisations. Additionally, it requires general insurers to appoint an auditor and an actuary, and mandates that these appointments must be approved by APRA. The Act further requires general insurers to comply with prudential standards determined by APRA, which cover matters such as capital adequacy, the valuation of liabilities, reinsurance arrangements, and the effectiveness of risk management strategies.
- The Act imposes various penalties and consequences for breaches. For example, it imposes a maximum penalty of 60 penalty units for breaches of authorisation conditions, breaches of conditions on a non-operating holding company (NOHC) authorisation, and offences related to the assignment of liabilities. The Act also provides for the revocation of authorisations under certain circumstances, such as failure to comply with the Act or prudential standards, or failure to pay certain charges. The Act includes provisions for the imposition of directions by APRA to comply with prudential standards, with penalties for non-compliance. Other offences under the Act, such as carrying on insurance business without authorisation, are also subject to penalties of up to 60 penalty units. In cases where a body corporate is convicted of an offence against the Act, a court may impose a fine of up to five times the maximum penalty. The Act also includes provisions for the referral of matters to professional associations for auditors and actuaries, and for the giving of directions by APRA to provide amounts for liabilities and to determine the value of assets.
- Area of Law
- Insurance Law
- Corporate Law & Governance
- Instrument
- Act
- Concepts
- Definitions & Interpretation
- Regulatory Standards
- Enforcement Powers
- Licensing & Registration
- Transitional Provisions
- Repeal & Amendment
