Financial Sector (Collection of Data) Exemption No. 3 of 2010

Financial Sector (Collection of Data) exemption No. 3 of 2010

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Financial Sector (Collection of Data) Act 2001 (the Act), subsection 16(1)

Under subsection 16(1) of the Act, APRA may, by legislative instrument, exempt a financial sector entity from the requirement to comply with all the requirements or specified requirements contained in applicable reporting standards.

A.C.N. 000 007 492 Limited (formerly Rural and General Insurance Limited) (in liquidation) (“RGIL”) is a “financial sector entity” as defined by subsection 5(2) of the Act. Financial Sector (Collection of Data) exemption No. 3 of 2010 (the instrument) exempts RGIL from the requirements contained in the reporting standards relating to quarterly and annual returns specified in the Schedule.

1. Background

On 2 July 2002 APRA issued an authorisation to carry on insurance business in Australia under subsection 12(1) of the Insurance Act 1973 to RGIL and RGIL is subject to conditions as varied from time to time.  In particular, on 11 July 2002 APRA imposed conditions that RGIL was only authorised to conduct insurance business for the sole purpose of discharging liabilities which arose under policies entered into prior to 2 July 2002, i.e., RGIL went into run-off.

The Judicial Manager’s report, dated 29 September 2010, refers to a number of problems that have been identified which may cause difficulty in RGIL meeting its FSCODA reporting requirements, namely:

• a lack of historical policy records;
• poorly maintained claims files and under-reserving;
• poor management and pursuance of reinsurance recoveries that may lead to avoidance or discount on those recoveries;
• lack of information to support loan transactions; and
• the lack of a run-off plan.

The company is in liquidation and cannot meet its financial obligations as and when they fall due.  An exemption would alleviate some of the further strain on the limited financial resources currently available to the RGIL Liquidator. 

Further, given that:

• RGIL has been in run off since 2002; and
• there are a limited number of outstanding claims;

there is minimal need for RGIL’s compliance with the FSCODA for the purposes of APRA’s prudential supervision of the financial sector.

2.      Purpose of the instrument

The purpose of the instrument is to exempt A.C.N. 000 007 492 Limited (formerly Rural and General Insurance Limited) (in liquidation) from all of the requirements relating to quarterly and annual reporting in the following reporting standards:

3.      Consultation

APRA has been in consultation with RGIL in relation to this issue.