Notice imposing conditions on an authorisation to carry on insurance business in Australia – Eric Insurance Limited 2023
Insurance Act 1973
To: Eric Insurance Limited ABN 18 009 129 793 (‘the general insurer’)
I, Sean Carmody, a delegate of APRA, under paragraph 13(1)(a) of the Act, impose conditions on the authorisation of the general insurer in the manner specified in the Schedule.
This notice, and the conditions imposed on the general insurer’s authorisation, commence from the date this instrument is made.
Dated: 21 September 2023
Sean Carmody Executive Director Insurance Division
Interpretation
Act means the Insurance Act 1973.
APRA means the Australian Prudential Regulation Authority.
insurance business has the meaning given in subsection 3(1) of the Act.
Schedule – the imposed conditions
1. Subject to Condition 2, the general insurer may only carry on insurance business in Australia for the purpose of discharging liabilities arising under policies issued by it on or before 31 October 2023.
2. The general insurer may, with the written approval of APRA in respect of existing arrangements with distribution partners, carry on insurance business in Australia for the purpose of discharging liabilities under policies issued by it on or before 7 June 2024.
Notes:
Note 1 Under section 13(4) of the Act, if APRA imposes conditions on a general insurer’s authorisation, APRA must give written notice to the insurer and ensure that notice that the action has been taken is published in the Gazette.
Note 2 Under section 14(1) of the Act, a general insurer commits an offence if the insurer does an act or fails to do an act and doing the act or failing to do the act results in a contravention of a condition of the insurer’s authorisation under section 12 and there is no determination in force under subsection 7(1) that this subsection does not apply to the insurer. The penalty is 300 penalty units.
Note 3 You may request APRA reconsider the decision in accordance with section 63(2) of the Act. The request for reconsideration must be made in writing, must set out the reasons for making the request, and must be given to APRA within 21 days after the day on which you first received notice of this decision, or within such further period as APRA allows. If you are dissatisfied with the outcome of APRA’s reconsideration of the decision, you may, subject to the Administrative Appeals Tribunal Act 1975, apply to the Administrative Appeals Tribunal for review of the reconsidered decision.
Overview
The Insurance Act 1973, enacted by the Australian Parliament, provides a regulatory framework for the insurance industry within Australia. This Act was introduced to address issues related to the conduct of insurance businesses, ensuring that insurers operate in a manner that protects policyholders and maintains financial stability within the industry. The Act empowers the Australian Prudential Regulation Authority (APRA) to impose conditions on the authorisation of general insurers to carry on insurance business, as demonstrated in the recent notice issued to Eric Insurance Limited. The primary policy objective of the Act is to safeguard the interests of policyholders and maintain the financial integrity of the insurance sector, ensuring that insurers can meet their obligations under the policies they issue.
Scope and Application
The notice under the Insurance Act 1973 imposes specific conditions on Eric Insurance Limited, an authorised general insurer, restricting the scope of its insurance business operations in Australia. These conditions, imposed by Sean Carmody, a delegate of the Australian Prudential Regulation Authority (APRA), are effective from the date of the notice, 21 September 2023. The primary limitation is that Eric Insurance Limited may only conduct insurance business in Australia to discharge liabilities arising under policies issued by it on or before 31 October 2023, subject to a secondary condition that involves obtaining APRA's written approval for existing arrangements with distribution partners to extend this scope until 7 June 2024. This restriction is imposed to ensure that the insurer maintains sufficient capital and resources to meet its obligations under the existing policies. Failure to comply with these conditions may result in a contravention of the insurer’s authorisation, with an offence carrying a penalty of 300 penalty units. The notice is mandated to be published in the Gazette, and Eric Insurance Limited has the right to request APRA reconsider the decision within 21 days of receiving the notice, with the option to seek further review by the Administrative Appeals Tribunal if dissatisfied with the reconsideration outcome.
Key Provisions
The notice issued under the Insurance Act 1973 imposes specific conditions on Eric Insurance Limited's authorisation to carry on insurance business in Australia. Section 1 of the notice stipulates that the insurer may only conduct insurance business for the purpose of discharging liabilities arising from policies issued on or before 31 October 2023, subject to the conditions outlined in Section 2. Section 2 further allows the insurer to continue discharging liabilities under policies issued up until 7 June 2024, provided it secures written approval from the Australian Prudential Regulation Authority (APRA) for existing arrangements with distribution partners. These provisions aim to ensure that Eric Insurance Limited's operations remain focused on fulfilling existing obligations while allowing some flexibility for ongoing business activities with APRA's oversight.
Eric Insurance Limited, as a general insurer, has specific obligations under these imposed conditions. Primarily, it must strictly adhere to the timelines and purposes outlined in the notice. The insurer must ensure that any insurance business activities are solely for the purpose of discharging liabilities from policies issued by the specified dates unless otherwise approved by APRA. Additionally, Eric Insurance Limited must maintain documentation and communication with APRA to demonstrate compliance with the conditions, particularly concerning the approval of existing arrangements with distribution partners.
Failure to comply with the conditions imposed on Eric Insurance Limited's authorisation can result in significant consequences. Under section 14(1) of the Insurance Act 1973, the insurer commits an offence if it fails to adhere to the conditions, leading to a contravention of its authorisation. The penalty for such an offence is 300 penalty units. This provision underscores the importance of strict compliance with the conditions to avoid legal repercussions. Furthermore, section 63(2) of the Act allows Eric Insurance Limited to request APRA to reconsider the decision if it believes there has been an error or if there are valid reasons for reconsideration. This request must be made in writing and within 21 days of receiving the notice, or any extended period allowed by APRA. If dissatisfied with the reconsideration outcome, Eric Insurance Limited may seek further review through the Administrative Appeals Tribunal, subject to the Administrative Appeals Tribunal Act 1975.