Insurance determination allowing extra time for claims No. 1 of 2010
Financial Claims Scheme relating to Australian Family Assurance Limited
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Insurance Act 1973, Section 62ZZA(1)
Under subsection 62ZZA(1) of the Insurance Act (1973) (the Act), APRA may specify a later date on which the period for making one or more claims that may give rise to an entitlement under Part VC of the Act ends. Part VC of the Act concerns the Financial Claims Scheme (FCS) for policyholders with insolvent general insurers.
The FCS was invoked for Australian Family Assurance Limited ABN 78 003 044 862 (AustFam) by the Minister for Financial Services, Superannuation and Corporate Law under subsection 62ZZC(1) of the Act on 15 October 2009. The period for making claims under the FCS is due to close on 15 October 2010, 12 months after being declared. APRA has made Insurance Act determination No. 1 of 2010 (the 2010 Instrument) extending that period.
- Background
Part VC of the Insurance Act 1973 (the Act) sets out arrangements for assisting policyholders in the event a general insurer fails. Section 62ZZC(1) provides that the Minister may make a declaration about a general insurer that is under judicial management and that APRA believes is insolvent. Certain persons who have valid claims connected with certain protected policies issued by the declared insurer are entitled to payments under Part VC regarding those claims, rather than having to prove as a creditor in a winding up of the insurer. Part VC operates to substitute APRA for those persons as creditors to the declared insurer to the extent of those persons' entitlements under Part VC.
Australian Family Assurance Limited (ABN 78 003 044 862) is a general insurer that
is under judicial management under Division 1of Part VB of the Act. Australian
Family Assurance has been only authorised to conduct run-off business since 2002.
The Minister made a declaration under subsection 62ZZC(1) on 15 October 2010. Pursuant to subparagraph 62ZZF(1)((b)(i) of the Act and subregulation 7C(2) of the Insurance Regulations 2002, the period during which persons may make claims under Part VC of the Act ends 12 months after the Minister makes a declaration under subsection 62ZZC(1).
2. Purpose of the instrument
APRA considers that there may be a number of persons entitled to claim under the scheme who may not do so prior to 15 October 2010. In order to extend the period in which the FCS is available in relation to AustFam, APRA is exercising its power under subsection 62ZZA(1) of the Act to specify a later date upon which the period for making claims ends.
3. Operation of the instrument
The 2010 Instrument extends by 12 months the period during which persons may make claims under the FCS in relation to AustFam.
4. Consultation
There has been consultation with the liquidator of AustFam in relation to the determination allowing extra time for claims. Policyholders who might be affected by the decision can only be benefited by the extension of time to claim.