Overview

The General Insurance Supervisory Levy Imposition Determination 2006 was enacted to establish the rates and calculation methods for the supervisory levy on general insurance companies for the 2006-07 financial year. This legislation was introduced to address the need for funding specific supervisory activities related to the general insurance sector, as stipulated under the General Insurance Supervisory Levy Imposition Act 1998. The Act was enacted by the Parliament of Australia, with the primary policy objective of ensuring that the operations of regulatory bodies such as the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC), and the Australian Taxation Office (ATO) are adequately funded. This determination replaced the previous General Insurance Supervisory Levy Imposition Determination 2005 and specifies a general component to fund APRA and certain activities of ASIC and ATO, as well as a special component to cover the costs of the National Claims and Policy Database (NCPD).

Scope and Application

The General Insurance Supervisory Levy Imposition Determination 2006 applies to companies registered under the Insurance Act 1973, specifically targeting general insurance companies. This determination, which commenced on 1 July 2006 for the 2006-07 financial year, encompasses two components: a general component to fund the operations of the Australian Prudential Regulation Authority (APRA) and certain activities of the Australian Securities and Investments Commission and the Australian Taxation Office; and a special component to fund the National Claims and Policy Database (NCPD). The levy is calculated based on the assets held by the entity for the general component and the eligible premium income (EPI) for the special component, with thresholds and percentages specified to ensure both minimum and maximum limits. The determination also outlines a flat levy for runoff insurers. Any obligations or liabilities incurred in previous financial years remain valid under the Acts Interpretation Act 1901. This legislative instrument is subject to the Legislative Instruments Act 2003.

Key Provisions

The General Insurance Supervisory Levy Imposition Determination 2006 (F2006L02166) outlines the levy imposed by the General Insurance Supervisory Levy Imposition Act 1998 on companies registered under the Insurance Act 1973 for the 2006-07 financial year. The levy is divided into two components: the general component and the special component (subsection 8(1AA)). The general component funds the operations of the Australian Prudential Regulation Authority (APRA), as well as certain activities of the Australian Securities and Investments Commission and the Australian Taxation Office (subsection 8(3)). The special component funds the costs of the National Claims and Policy Database (NCPD). The restricted levy percentage for the general component is set at 0.01990 per cent of assets held, with a minimum of $4,700 and a maximum of $700,000 (subsection 8(3)(a)-(c)). The unrestricted levy percentage for the general component is 0.007259 per cent of assets held (subsection 8(3)(ca)). The special levy for public/product liability insurers is set at 0.2292 per cent of eligible premium income (EPI), with a minimum of $15,000 and a maximum of $150,000 (subsection 8(3)(e)). For professional liability insurers, it is set at 0.2050 per cent of EPI, with a minimum of $15,000 and a maximum of $96,000 (subsection 8(3)(f)). For insurers that provide both types of insurance, the special levy is determined by adding the levies for each type (subsection 8(3)(g)). Insurers that provide runoff insurance are subject to a flat special levy of $7,500 for public/product or professional indemnity runoff insurance and $15,000 for both (subsection 8(3)(h)). The determination imposes several obligations on the entities it governs. General insurance companies must calculate their asset values according to the prescribed method to determine the restricted and unrestricted components of the general levy (subsection 8(3)(d)). For the special levy, insurers must calculate their EPI in accordance with the prescribed method (subsection 8(3)(h)). Insurers that write both public/product liability and professional indemnity insurance must separately calculate the special levy for each type of insurance and then sum the amounts (subsection 8(3)(g)). Insurers that provide runoff insurance must pay a flat special levy as determined by the determination (subsection 8(3)(h)). There are no specific offences or penalties outlined in the determination itself; however, breach of the obligations to pay the supervisory levy could result in civil or criminal consequences under the General Insurance Supervisory Levy Imposition Act 1998 or other relevant legislation. Penalties for non-compliance with the levy requirements could include fines or other sanctions as prescribed by the Act or other applicable laws. The determination, being a legislative instrument under the Legislative Instruments Act 2003, ensures that the levy is imposed in accordance with the legislative framework established by the relevant Acts.