Overview

The General Insurance Supervisory Levy Imposition Determination 2008 was enacted to address the funding of regulatory and supervisory activities within the Australian insurance sector. This determination was introduced under the authority of the General Insurance Supervisory Levy Imposition Act 1998, which was established to impose a levy on general insurance companies to fund the operations of various regulatory bodies. The determination applies to the 2008–09 financial year, superseding the previous year's levy structure, while ensuring that any liabilities incurred under the old regime remain valid. The policy objective, as outlined in the Explanatory Statement, is to ensure that the necessary funds are allocated to support the regulatory functions of the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission, and the Australian Taxation Office. The levy is divided into a general component, which supports broader regulatory activities, and a special component, which funds the specific costs associated with the National Claims and Policy Database.

Scope and Application

The General Insurance Supervisory Levy Imposition Determination 2008 applies to companies registered under the Insurance Act 1973, specifically those in the general insurance sector, and pertains to the financial year 2008–09. This determination, which revokes the 2007 version upon its commencement on 1 July 2008, imposes a levy on general insurance companies 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. It also funds the National Claims and Policy Database. The levy consists of a general component, calculated at 0.01965% of an entity's assets for the restricted component, subject to a minimum of $4,700 and a maximum of $700,000, and 0.006645% for the unrestricted component, and a special component calculated based on eligible premium income for different types of insurers, with minimum and maximum thresholds. This determination is a legislative instrument under the Legislative Instruments Act 2003, and any obligations or liabilities incurred in previous financial years remain valid under section 50 of the Acts Interpretation Act 1901.

Key Provisions

The General Insurance Supervisory Levy Imposition Determination 2008 (the Determination) outlines the levy imposed on companies registered under the Insurance Act 1973 for the 2008-09 financial year, as per the General Insurance Supervisory Levy Imposition Act 1998 (the Act). The Determination consists of two components: the general component and the special component. Section 8(1AA) of the Act specifies that these components form the levy payable by general insurance companies. The general component, as defined in subsection 8(3) of the Act, is calculated at 0.01965 per cent of the company’s assets, with a minimum of $4,700 and a maximum of $700,000. The unrestricted component is set at 0.006645 per cent of the company's assets. This 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. The special component is also governed by subsection 8(3) of the Act and is designed to fund the National Claims and Policy Database (NCPD). For public/product liability insurers, the special levy is calculated at 0.0577 per cent of the insurer's eligible premium income (EPI), with a minimum of $5,000 and a maximum of $50,000. For professional liability insurers, the special levy is calculated at 0.0499 per cent of the insurer's EPI, with a minimum of $5,000 and a maximum of $32,000. Insurers that provide both types of coverage will have their special levy calculated by adding the two components together. Insurers that write runoff policies for either public/product or professional indemnity insurance will pay a flat fee of $2,500, while those providing both will pay $5,000. The Determination imposes specific obligations on general insurance companies to calculate and pay the levies as outlined. The companies must determine their asset value and EPI as per the provisions set out in the Determination and the Act. The Minister for Finance retains the authority to determine the various percentages and caps applicable to the levies, ensuring that the financial burden is equitably distributed and manageable for the companies involved. Failure to comply with the provisions of the Determination and the Act can lead to civil and criminal consequences. The Act does not explicitly state the penalties for non-compliance, but under general Australian law, breaches of financial obligations can result in substantial fines and potential legal action. Companies found to be in breach may also face reputational damage and regulatory scrutiny, further impacting their operations and financial standing.