Notice varying conditions on Authorisation to carry on insurance business

Insurance Act 1973

TO: Poseidon Insurance Co Pty Ltd ABN 25 000 162 649 (the general insurer)

SINCE

1. APRA issued to the general insurer an Authorisation to carry on insurance business in Australia under subsection 12(1) of the Insurance Act 1973 (the Act), on 25 June 2002  (the Authorisation); and
2. the Authorisation is subject to conditions,

I, Brandon Kong Leong Khoo, a delegate of APRA:

(i)                 under paragraph 13(1)(b) of the Act, VARY those conditions imposed on the

Authorisation in the manner specified in the attached Schedule; and

(ii)               under paragraph 13(1)(a) of the Act, IMPOSE those conditions on the Authorisation, specified in the attached Schedule.

When this Notice takes effect, the conditions which apply to the Authorisation are set out in the attached Schedule of consolidated conditions.

Dated: 29 July 2013

[Signed]

Brandon Kong Leong Khoo Executive General Manager Specialised Institutions Division

Interpretation Document ID: 209473

In this Notice

APRA means the Australian Prudential Regulation Authority. insurance business has the meaning given in section 3 of the Act. prudential standard has the meaning given in section 3 of the Act.

Note 1

Under subsection 13(1) of the Act, APRA may, at any time, by written notice to the general insurer

impose conditions or additional conditions or vary or revoke conditions imposed on the insurer's authorisation

under section 12 of the Act. The conditions must relate to prudential matters.

Note 2

Under subsection 13(2) of the Act, a condition may be expressed to have effect despite anything in

the prudential standards.

Note 3

Under subsection 13(4) of the Act, if APRA imposes, varies or revokes the 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 4

Under subsection 14(1) of the Act, a general insurer commits an offence if:

(a)  the insurer does an act or fails to do an act; and

(b)  doing the act or failing to do the act results in a contravention of a condition of the insurer's authorisation under section 12 of the Act; and

(c)  there is no determination in force under subsection 7(1) of the Act, that subsection 14(1) of the Act does not apply to the insurer.

The penalty is 300 penalty units. Under subsection 14(1A) of the Act, where an individual commits an offence against subsection 14(1) of the Act, because of Part 2.4 of the Criminal Code or commits an offence under Part

2.4 of the Criminal Code in relation to an offence against subsection 14(1) of the Act, the individual is punishable, on conviction, by a penalty not exceeding 60 penalty units. Under subsection 14(2) of the Act, an offence against section 14 of the Act, is an offence of strict liability.

Note 5

Under subsection 13(6) of the Act, a decision to impose conditions, or additional conditions, or to

vary the conditions on the Authorisation are reviewable decisions to which Part VI of the Act applies. If you

are dissatisfied with a reviewable decision, you may seek reconsideration of the decision by APRA in accordance with subsection 63(2) of the Act. The request for reconsideration must be in writing, must state the reasons for the request, and must be given to APRA within 21 days after the decision first comes to your  notice or within such further period as APRA allows. If dissatisfied with APRA’s reconsidered decision confirming or varying the first decision, you may, subject to the Administrative Appeals Act 1975, apply to the Administrative Appeals Tribunal for review of the reconsidered decision.

The address where written notice may be given to APRA is Level 26, 400 George Street, Sydney NSW 2000.

Schedule - the conditions which are being varied

The existing condition(s) which are to be varied:

7.           It is intended that the requirements in conditions 4, 5 and 6 shall apply to the general insurer to the exclusion of the following:

(a) Prudential Standard GPS 110 Capital Adequacy;

(b) paragraphs 9(a) and 15-20, 21-27 and 28-41 of Prudential Standard GPS 220 Risk Management;

(c) Prudential Standard GPS 230 Reinsurance Management;

(d) paragraphs 14 (except the first sentence) and 69 of Prudential Standard GPS 310 Audit and Actuarial Reporting and Valuation; and

(e) paragraphs 17, 18, 34-55, 59, 70, 71 and 82 of Prudential Standard GPS 510 Governance.

The condition(s) as varied are:

7.           It is intended that the requirements in conditions 4, 5 and 6 shall apply to the general insurer to the exclusion of the following:

(a) Prudential Standard GPS 110 Capital Adequacy;

(b) paragraphs 12(a) and 18-40 of Prudential Standard GPS 220 Risk Management;

(c) Prudential Standard GPS 230 Reinsurance Management;

(d) paragraphs 14 (except the first sentence) and 61 of Prudential Standard GPS 320 Actuarial and Related Matters; and

(e) paragraphs 18, 19-20, 36, 42-63, 67 and 80-81 of Prudential Standard CPS 510 Governance.

8.           The general insurer must at all times have at least four directors, two of whom must be independent directors.

1. The general insurer may only conduct insurance business in Australia for the sole purpose of discharging liabilities that arose under policies entered into prior to 20 February 1992.

2.                 The general insurer must seek APRA’s approval before making a reduction in capital.

A reduction in capital includes, but is not limited to: share buybacks, the redemption,

repurchase or early repayment of any eligible captial instruments issued by the general insurer or a special purpose vehicle; trading in own shares; or where aggregate interest and divident payments on capital exceed the general insurer’s after-tax earning in the year to which they relate (i.e dividend and interest payments on capital wholly or partly funded from retained earnings).

3.             The general insurer must invest its funds in deposits with a locally incorporated ADI or in Commonwealth Government Securities; any investments in other assets must be approved by APRA.

4.                 The general insurer must comply with the following:

(a)          where the general insurer has share capital, its paid-up capital shall not at any

time be less than $2,000,000;

(b)              where the general insurer is incorporated in Australia, the value of its assets

shall at all times exceed the amount of its liabilities by not less than: (i) $2,000,000; or

(ii) 15% of its outstanding claims provision as at the end of its last

preceding financial year; whichever is greater; and

(c)          the value of the assets in Australia of the general insurer shall at all times exceed the amount of its liabilities in Australia by not less than:

(i) $2,000,000; or

(ii)  15% of its outstanding claims provision as at the end of its last preceding financial year;

whichever is greater.

5.             The general insurer is required to maintain a current run-off plan and submit revisions to APRA within 14 days of them being approved by the Board of the general insurer. The run-off plan must be revised, re-approved by the Board and resubmitted to APRA should there be material change to the operations of the general insurer. The run-off plan should incorporate detail of how the general insurer is managing the run-off insurance liabilities, including reinsurance, investment policy and administration.

6.             The general insurer must provide APRA with a Board Declaration, at the same time it lodges its yearly accounts, that, for the last financial year:

(a) the general insurer has systems in place to ensure compliance with the Insurance Act 1973 and Regulations, Prudential Standards, authorisations conditions and directions;

(b) the Board and senior management have planned for running off the insurance liabilities of the general insurer, identified the key risks facing the general insurer and have a strategy for selecting and monitoring reinsurance programs and that these matters are incorporated in the general insurer’s run-off plan;

(c) the general insurer has substantially complied with its run-off plan and that the plan is operating effectively in practice, having regard to the risks it is designed to control; and

(d) the copy of the general insurer’s run-off plan provided to APRA is accurate and

current.

7.             It is intended that the requirements in conditions 4, 5 and 6 shall apply to the general insurer to the exclusion of the following:

(a) Prudential Standard GPS 110 Capital Adequacy;

(b) paragraphs 12(a) and 18-40 of Prudential Standard GPS 220 Risk Management;

(c) Prudential Standard GPS 230 Reinsurance Management;

(d) paragraphs 14 (except the first sentence) and 61 of Prudential Standard GPS 320 Actuarial and Related Matters; and

(e) paragraphs 18, 19-20, 36, 42-63, 67 and 80-81 of Prudential Standard CPS 510 Governance.

8.             The general insurer must at all times have at least four directors, two of whom must be independent directors.