EXPLANATORY STATEMENT
General Insurance Supervisory Levy Imposition Determination 2007
This determination relates to a levy imposed by the General Insurance Supervisory Levy Imposition Act 1998 on companies registered under the Insurance Act 1973.
This determination commences on 1 July 2007 and relates to the 2007‑08 financial year. The General Insurance Supervisory Levy Imposition Determination 2006 is revoked upon commencement of this determination. Consistent with section 50 of the Acts Interpretation Act 1901, any obligation or liability incurred in previous financial years remains valid.
Subsection 8(1AA) specifies that the levy payable by a general insurance company for a financial year is to comprise of a general component and a special component.
2007‑08 General Component
For 2007‑08 financial year, the general component will fund the operations of the Australian Prudential Regulation Authority (APRA), and certain activities performed by the Australian Securities and Investments Commission and the Australian Taxation Office.
In relation to the general component, subsection 8(3) of the General Insurance Supervisory Levy Imposition Act 1998 allows the Minister to determine:
(a) the maximum restricted levy amount for each financial year;
(b) the minimum restricted levy amount for each financial year;
(c) the restricted levy percentage for each financial year;
(ca) the unrestricted levy percentage for each financial year;
(d) how a general insurance company’s asset value is to be calculated;
This determination provides that the restricted component of the 2007‑08 general levy will be calculated at 0.01690 per cent of assets held by the entity, subject to a minimum of $4 700 and a maximum of $700 000. The unrestricted component of the 2007-08 general levy will be calculated at 0.006414 per cent of assets held by the entity.
2007‑08 Special Component Levy
For 2007‑08 financial year, the special component will fund costs of the National Claims and Policy Database (NCPD). This component was levied for the first time in 2006‑07 following amendments to the General Insurance Supervisory Levy Imposition Act 1998.
In relation to the special component, subsection 8(3) of the General Insurance Supervisory Levy Imposition Act 1998 allows the Minister to determine:
(e) the special maximum levy amount for each financial year;
(f) the special minimum levy amount for each financial year;
(g) the special levy percentage for each financial year; and
(h) how a general insurance company’s eligible premium income (EPI) is to be calculated.
This determination provides that for a public/product liability insurer the special levy amount will be calculated at 0.0473 per cent of the insurer’s EPI, subject to a minimum of $5 000 and a maximum of $50 000. For a professional liability insurer the special levy amount will be calculated at 0.0590 per cent of the insurer’s EPI, subject to a minimum of $5 000 and a maximum of $32 000.
This determination provides that the special levy payable by an insurer that writes both public/product liability and professional indemnity insurance is determined by adding the sum of:
• 0.0473 per cent of the insurer’s EPI, arising from public/product liability insurance, subject to a minimum of $5 000 and a maximum of $50 000; and
• 0.0590 per cent of the insurer’s EPI, arising from professional indemnity insurance, subject to a minimum of $5 000 and a maximum of $32 000.
This determination provides that for either a public/product or profession indemnity runoff insurer the special levy amount will be a flat $2 500. For insurers that provide both public/product and professional indemnity runoff insurance, the special levy amount will be a flat $5 000.
The finance sector has been consulted on the 2007‑08 supervisory levies through a Treasury and APRA discussion paper released on 25 May 2007.
This determination is a legislative instrument for the purposes of the Legislative Instruments Act 2003.