Notice varying conditions on Authorisation to carry on insurance business - The Mortgage Insurance Company Pty. Limited

Administered by Department of the Treasury

Legislation au C2013G00890 In force Gazette

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Notice varying conditions on Authorisation to carry on insurance business

Insurance Act 1973

 

TO:  The Mortgage Insurance Company Pty. Limited ACN 000 559 553 (the general insurer)

 Suite 31, Level 14 309 Kent St, SYDNEY, New South Wales

 

SINCE

 

A 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 29 June 1998 (the Authorisation); and

 

B the Authorisation is subject to the conditions which are set out in the Schedule attached to this Notice;

 

I, Nigel Boik, a delegate of APRA, under paragraph 13(1)(b) of the Act, VARY the conditions imposed on the Authorisation in the manner set out in the Schedule attached to this Notice and from the date this Variation takes effect, the conditions which apply to the Authorisation are those set out in the Schedule of conditions attached to this Notice.

 

This Variation takes effect from the date it is executed.  

 

Dated: 29 May 2013

 

[Signed]

 

Nigel Boik

Acting Executive General Manager

Specialised Institutions Division

 

 

 

 

 

 

Interpretation

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 varies 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 maximum 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 fine 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, on the Authorisation is a reviewable decision to which Part VI of the Act applies. If you are dissatisfied with this 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 is Level 26, 400 George Street, Sydney NSW 2000.
Schedule-the conditions on the Authorisation

 

  1. The general insurer will only carry on insurance business for the purpose of discharging liabilities under contracts of insurance entered into on or before 9 April 2008.
  2. Except with the prior written approval of APRA, the general insurer must not:

(a)      enter into, vary or terminate any contractual agreement or arrangement where another party to the contract or arrangement is TMIC Holdings Pty Ltd ACN 098 954 664 or an associate of that company; or

(b)      make any payment to or transfer any assets to TMIC Holdings Pty Ltd ACN 098 954 664 or any associate of that company; or

(c)      enter into any dealing or transaction at the request of TMIC Holdings Pty Ltd ACN 098 954 664 or an associate of that company or a receiver, administrator or liquidator of an associate of that company.

An associate has the meaning set out in clause 4 of Schedule 1 to the Financial Sector (Shareholdings) Act 1998.

3.       The general insurer must comply with the requirements of Prudential Standard GPS 230 Reinsurance Management but subject to the following variations:

(a)    in respect of paragraphs 9(a), 12(a), 15 and 16, the general insurer is not required to take into account reinsurance contracts incepting on or before 18 August 2011; and

(b)    in respect of paragraphs 23 and 24, the general insurer is not required to submit details to APRA of its reinsurance arrangements in respect of reinsurance contracts incepting on or before 18 August 2011.

4.       The general insurer must comply with the requirements of Prudential Standard GPS 310 Audit and Actuarial Reporting and Valuation as if the following requirements applied under that standard:

(a)    a report of a review of its run-off plan from the general insurer’s Appointed Actuary must be obtained on a triennial basis; and

(b)    an External Peer Review report of its Insurance Liability Valuation Report must be prepared by the Reviewing Actuary on a triennial basis.

The first reports under paragraphs 4(a) and (b) are to be obtained in respect of an investigation conducted as at 30 June 2013.


Schedule-the conditions which are being varied

 

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

 

Condition 3

 

3.       The general insurer must comply with the requirements of Prudential Standard GPS 230 Reinsurance Management but subject to the following variations:

(a)    in respect of paragraphs 9(a), 12(a), 15 and 16, the general insurer is not required to take into account reinsurance contracts incepting on or before 18 August 2011; and

(b)    in respect of paragraphs 23 and 24, the general insurer is not required to submit details to APRA of its reinsurance arrangements in respect of reinsurance contracts incepting on or before 18 August 2011.

Condition 4

 

4.       The general insurer must comply with the requirements of Prudential Standard GPS 310 Audit and Actuarial Reporting and Valuation as if the following requirements applied under that standard:

(a)    a report of a review of its run-off plan from the general insurer’s Appointed Actuary must be obtained on a triennial basis; and

(b)    an External Peer Review report of its Insurance Liability Valuation Report must be prepared by the Reviewing Actuary on a triennial basis.

The first reports under paragraphs 4(a) and (b) are to be obtained in respect of an investigation conducted as at 30 June 2013.

 

The condition(s) as varied are:

 

Condition 3

 

3.       The general insurer must comply with the requirements of Prudential Standard GPS 230 Reinsurance Management but subject to the following variations:

(a)    in respect of paragraphs 13(a), 16(a), 19 and 20, the general insurer is not required to take into account reinsurance contracts incepting on or before 18 August 2011; and

(b)    in respect of paragraphs 27 and 28, the general insurer is not required to submit details to APRA of its reinsurance arrangements in respect of reinsurance contracts incepting on or before 18 August 2011.

Condition 4

 

4.       The general insurer must comply with the requirements of Prudential Standard GPS 320 Actuarial and Related Matters as if the following requirements applied under that standard:

(a)    a report of a review of its run-off plan from the general insurer’s Appointed Actuary must be obtained on a triennial basis; and

(b)    an External Peer Review report of its Insurance Liability Valuation Report must be prepared by the Reviewing Actuary on a triennial basis.

The first reports under paragraphs 4(a) and (b) are to be obtained in respect of an investigation conducted as at 30 June 2013.


Schedule- the conditions which apply when this Variation takes effect.

 

  1. The general insurer will only carry on insurance business for the purpose of discharging liabilities under contracts of insurance entered into on or before 9 April 2008.
  2. Except with the prior written approval of APRA, the general insurer must not:

(a)      enter into, vary or terminate any contractual agreement or arrangement where another party to the contract or arrangement is TMIC Holdings Pty Ltd ACN 098 954 664 or an associate of that company; or

(b)      make any payment to or transfer any assets to TMIC Holdings Pty Ltd ACN 098 954 664 or any associate of that company; or

(c)      enter into any dealing or transaction at the request of TMIC Holdings Pty Ltd ACN 098 954 664 or an associate of that company or a receiver, administrator or liquidator of an associate of that company.

An associate has the meaning set out in clause 4 of Schedule 1 to the Financial Sector (Shareholdings) Act 1998.

3.       The general insurer must comply with the requirements of Prudential Standard GPS 230 Reinsurance Management but subject to the following variations:

(a)      in respect of paragraphs 13(a), 16(a), 19 and 20, the general insurer is not required to take into account reinsurance contracts incepting on or before 18 August 2011; and

(b)      in respect of paragraphs 27 and 28, the general insurer is not required to submit details to APRA of its reinsurance arrangements in respect of reinsurance contracts incepting on or before 18 August 2011.

4.       The general insurer must comply with the requirements of Prudential Standard GPS 320 Actuarial and Related Matters as if the following requirements applied under that standard:

(a)      a report of a review of its run-off plan from the general insurer’s Appointed Actuary must be obtained on a triennial basis; and

(b)      an External Peer Review report of its Insurance Liability Valuation Report must be prepared by the Reviewing Actuary on a triennial basis.

The first reports under paragraphs 4(a) and (b) are to be obtained in respect of an investigation conducted as at 30 June 2013.

 

Overview

The Insurance Act 1973 was enacted to regulate the insurance industry in Australia and ensure the protection of policyholders. It was introduced to address the need for a structured regulatory framework governing insurance companies to maintain financial stability and public confidence. The Act is administered by the Australian Prudential Regulation Authority (APRA), which has the mandate to regulate and supervise the insurance industry. One of the policy objectives of the Act is to ensure that insurance companies maintain adequate capital and comply with prudential standards to safeguard the interests of policyholders and the broader financial system. This legislation empowers APRA to impose, vary, or revoke conditions on an authorisation to carry on insurance business. These conditions are designed to address specific prudential concerns and ensure that the insurer operates in a manner consistent with the regulatory objectives. The Act stipulates that any changes to the conditions must be communicated to the insurer and published in the Gazette, ensuring transparency and accountability in the regulatory process. Non-compliance with the conditions imposed on an authorisation constitutes an offence, with potential penalties for both the insurer and individual officers. The Act also provides avenues for review and reconsideration of APRA’s decisions, promoting fairness and due process in the regulatory framework.

Scope and Application

The Insurance Act 1973 applies to the Mortgage Insurance Company Pty. Limited, a general insurer authorised to carry on insurance business in Australia under the Act. This Notice, executed on 29 May 2013 by Nigel Boik, a delegate of the Australian Prudential Regulation Authority (APRA), varies the conditions imposed on the insurer’s authorisation. The authorisation allows the insurer to conduct business solely for discharging liabilities under contracts of insurance entered into before 9 April 2008, with restrictions on entering into or varying contractual agreements or arrangements with TMIC Holdings Pty Ltd ACN 098 954 664 or its associates, making payments to or transferring assets to such entities, or engaging in dealings or transactions at their request. The variations affect the insurer’s compliance with certain prudential standards, particularly concerning reinsurance management and actuarial and related matters, with specific exemptions for reinsurance contracts incepting before 18 August 2011. The Act provides a framework for APRA to impose, vary, or revoke conditions on an insurer's authorisation, with the authority extending to the Commonwealth of Australia. The insurer must comply with the varied conditions from the date the Variation takes effect, and failure to do so constitutes an offence with prescribed penalties. The Act allows for review and reconsideration of APRA's decisions under the Administrative Appeals Act 1975.

Key Provisions

Under the Insurance Act 1973, the Australian Prudential Regulation Authority (APRA) has the authority to impose, vary, or revoke conditions on an authorisation granted to a general insurer, such as The Mortgage Insurance Company Pty. Limited. In this case, APRA has varied the conditions of the authorisation issued to the general insurer on 29 June 1998. The varied conditions are outlined in the attached Schedule. These conditions pertain to the scope of insurance business the general insurer can undertake, restrictions on certain transactions, and compliance with prudential standards. Specifically, the general insurer is now restricted to discharging liabilities under insurance contracts entered into before 9 April 2008 and must not enter into certain agreements or transactions with TMIC Holdings Pty Ltd or its associates without APRA’s prior written approval. The varied conditions impose several obligations on the general insurer. Firstly, they are limited in their insurance business activities to only discharging liabilities under contracts entered into prior to 9 April 2008. Secondly, the insurer must obtain written approval from APRA before entering into, varying, or terminating any contractual agreements or arrangements with TMIC Holdings Pty Ltd or its associates. This also applies to any payments or asset transfers to these entities and any dealings or transactions requested by TMIC Holdings Pty Ltd or its associates. Thirdly, the insurer must comply with Prudential Standard GPS 230 Reinsurance Management, with certain exceptions regarding reinsurance contracts incepting on or before 18 August 2011. Lastly, the insurer must comply with Prudential Standard GPS 320 Actuarial and Related Matters, including obtaining triennial reports from its Appointed Actuary and External Peer Review reports on its Insurance Liability Valuation Report. Failure to comply with the conditions of the authorisation as varied by APRA can lead to significant legal consequences. Under the Act, a general insurer commits an offence if it does or omits to do an act that results in a contravention of a condition of its authorisation. Such an offence is considered one of strict liability, meaning the insurer can be held liable even if the contravention was unintentional. The maximum penalty for such an offence is 300 penalty units, which, as of the most recent update, equates to AUD 45,000. Additionally, individuals involved in the contravention of these conditions can be subject to penalties under the Criminal Code, with a maximum fine of 60 penalty units, or AUD 9,000. These penalties underscore the importance of strict adherence to the conditions set by APRA to avoid legal repercussions.

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