INSURANCE ACT 1973 - SECT 104 APRA may give directions in certain circumstances
INSURANCE ACT 1973 - SECT 104
APRA may give directions in certain circumstancesBasis on which directions may be given
(1) APRA may give a body corporate that is a general insurer or an authorised NOHC a direction of a kind specified in subsection (3) if APRA has reason to believe that:
(a) the body corporate has contravened a provision of this Act, regulations made under this Act, prudential standards, or the Financial Sector (Collection of Data) Act 2001 ; or
(b) the body corporate is likely to contravene this Act, regulations made under this Act, prudential standards, or the Financial Sector (Collection of Data) Act 2001 , and the direction is reasonably necessary for one or more prudential matters relating to the body corporate; or
(c) the body corporate has contravened a condition or direction under this Act or the Financial Sector (Collection of Data) Act 2001 ; or
(d) the direction is necessary in the interests of:
(i) if the body corporate is a general insurer--policyholders of the general insurer; or
(ii) if the body corporate is an authorised NOHC--policyholders of any general insurer that is a subsidiary of the NOHC; or
(e) the body corporate is, or is about to become, unable to meet its liabilities; or
(f) there is, or there might be, a material risk to the security of the body corporate's assets; or
(g) there has been, or there might be, a material deterioration in the body corporate's financial condition; or
(h) the body corporate is conducting its affairs in an improper or financially unsound way; or
(i) the failure to issue a direction would materially prejudice the interests of:
(i) if the body corporate is a general insurer--policyholders of the general insurer; or
(ii) if the body corporate is an authorised NOHC--policyholders of any general insurer that is a subsidiary of the NOHC; or
(j) the body corporate is conducting its affairs in a way that may cause or promote instability in the Australian financial system.
(1A) APRA may give a body corporate that is a general insurer or is an authorised NOHC a direction of a kind specified in subsection (3) if APRA has reason to believe that:
(a) a subsidiary of the body corporate has contravened a provision of this Act, regulations made under this Act, prudential standards, or the Financial Sector (Collection of Data) Act 2001 ; or
(b) a subsidiary of the body corporate is likely to contravene this Act, regulations made under this Act, prudential standards, or the Financial Sector (Collection of Data) Act 2001 ; or
(c) the direction is in respect of a subsidiary of the body corporate and is necessary in the interests of:
(i) if the body corporate is a general insurer--policyholders of the general insurer; or
(ii) if the body corporate is an authorised NOHC--policyholders of any general insurer that is a subsidiary of the NOHC; or
(d) a subsidiary of the body corporate is, or is about to become, unable to meet the subsidiary's liabilities; or
(e) there is, or there might be, a material risk to the security of the assets of a subsidiary of the body corporate; or
(f) there has been, or there might be, a material deterioration in the financial condition of a subsidiary of the body corporate; or
(g) a subsidiary of the body corporate is conducting the subsidiary's affairs in an improper or financially unsound way; or
(h) a subsidiary of the body corporate is conducting the subsidiary's affairs in a way that may cause or promote instability in the Australian financial system; or
(j) a subsidiary of the body corporate is conducting the subsidiary's affairs in a way that may cause it to be unable to continue to supply services to:
(i) if the body corporate is a general insurer--the general insurer; or
(ii) if the body corporate is an authorised NOHC--any general insurer that is a subsidiary of the NOHC; or
(k) the direction is in respect of a subsidiary of the body corporate and the failure to issue a direction would materially prejudice the interests of:
(i) if the body corporate is a general insurer--policyholders of the general insurer; or
(ii) if the body corporate is an authorised NOHC--policyholders of any general insurer that is a subsidiary of the NOHC.
(1B) However, APRA can only make a direction as a result of a ground referred to in paragraph (1A)(a), (b), (d), (e), (f), (g) or (j) if APRA considers that the direction is reasonably necessary for one or more prudential matters relating to the body corporate.
(1C) APRA may give a body corporate that is a subsidiary of a general insurer or of an authorised NOHC a direction of a kind specified in subsection (3) if:
(a) APRA has given the general insurer or authorised NOHC a direction under subsection (1A) because one or more of the grounds referred to in that subsection have been satisfied in respect of the subsidiary; or
(b) APRA may give the general insurer or authorised NOHC a direction under subsection (1A) because one or more of the grounds referred to in that subsection have been satisfied in respect of the subsidiary.
(1D) APRA cannot give a direction under subsection (1C) to a body corporate of a kind specified in regulations (if any) made for the purposes of this subsection.
(1E) Subsections (1), (1A) and (1C) do not limit each other.
(a) be given by notice in writing to the body corporate; and
(i) in the case of a direction under subsection (1C)--the ground referred to in subsection (1A) as a result of which the direction is given; or
(ii) otherwise--the ground referred to in subsection (1) or (1A) as a result of which the direction is given.
APRA may disregard external support
(2A) In deciding whether to give a direction under subsection (1), (1A) or (1C) to a body corporate, APRA may disregard any external support for the body corporate.
(2B) The regulations may specify that a particular form of support is not external support for the purposes of subsection (2A).
(3) The kinds of direction that the body corporate may be given are directions to do, or to cause a body corporate that is its subsidiary to do, any one or more of the following:
(a) to comply with the whole or a part of this Act, regulations made under this Act, prudential standards, or the Financial Sector (Collection of Data) Act 2001 ;
(b) to comply with a condition or direction referred to in paragraph (1)(c);
(c) to order an audit of the affairs of the body corporate, at the expense of the body corporate, by an auditor chosen by APRA;
(d) to remove a director or senior manager from office;
(e) to ensure a director or senior manager of the body corporate does not take part in the management or conduct of the business of the body corporate except as permitted by APRA;
(f) to appoint a person or persons as a director or senior manager of the body corporate for such term as APRA directs;
(g) to remove any auditor of the body corporate from office and appoint another auditor to hold office for such term as APRA directs;
(h) not to give financial accommodation to any person;
(k) not to accept any payment on account of share capital, except payments in respect of calls that fell due before the direction was given;
(l) not to repay any amount paid on shares;
(m) not to pay a dividend on any shares;
(n) not to pay or transfer any amount to any person, or create an obligation (contingent or otherwise) to do so;
(o) not to undertake any financial obligation (contingent or otherwise) on behalf of any other person;
(p) to provide, or further provide, in its accounts for the purposes of this Act, regulations made under this Act and the prudential standards, a specified amount or an amount determined in a specified way in respect of its liabilities or the value of a specified asset of the body corporate;
(q) to order an actuarial investigation of the affairs of the body corporate, at the expense of the body corporate, by an actuary chosen by APRA;
(r) to terminate the appointment of the actuary appointed by the body corporate and to appoint another actuary to hold office for such terms as APRA directs;
(s) not to issue any policy, undertake any liability under any contract of insurance or collect any premium;
(t) not to discharge any policy or other liability;
(u) to make changes to the body corporate's systems, business practices or operations;
(v) to reconstruct, amalgamate or otherwise alter all or part of any of the following:
(i) the business, structure or organisation of the body corporate;
(ii) the business, structure or organisation of the group constituted by the body corporate and its subsidiaries;
(w) to do, or to refrain from doing, anything else in relation to the affairs of the body corporate.
A direction under paragraph (n) not to pay or transfer any amount does not apply to the payment or transfer of money pursuant to an order of a court or a process of execution.
(4) Without limiting subsection (3), a direction referred to in a paragraph of that subsection may:
(a) deal with only some of the matters referred to in that paragraph; or
(b) deal with a particular class or particular classes of those matters; or
(c) make different provision with respect to different matters or different classes of matters.
(4A) Without limiting the generality of paragraph (3)(w), a direction under that paragraph to a foreign general insurer may be any one or more of the following:
(a) a direction that the foreign general insurer act in a way so as to ensure that:
(i) a particular asset, or a particular class of assets, of the foreign general insurer is returned to the control (however described) of the part of the foreign general insurer's insurance business that is carried on in Australia; or
(ii) a particular liability, or a particular class of liabilities, of the foreign general insurer ceases to be the responsibility (however described) of the part of the foreign general insurer's insurance business that is carried on in Australia;
(b) a direction that the foreign general insurer not act in a way that has the result that:
(i) a particular asset, or a particular class of assets, of the foreign general insurer ceases to be under the control (however described) of the part of the foreign general insurer's insurance business that is carried on in Australia; or
(ii) a particular liability, or a particular class of liabilities, of the foreign general insurer becomes the responsibility (however described) of the part of the foreign general insurer's insurance business that is carried on in Australia.
(4B) The kinds of direction that may be given as mentioned in subsection (3) are not limited by any other provision in this Part.
(4C) The kinds of direction that may be given as mentioned in a particular paragraph of subsection (3) are not limited by any other paragraph of that subsection.
(5) The direction may deal with the time by which, or period during which, it is to be complied with.
Body corporate and subsidiary have power to comply with direction
(6) The body corporate has power to comply with the direction despite anything in its constitution or any contract or arrangement to which it is a party.
(7) If the direction requires the body corporate to cause a subsidiary to do, or to refrain from doing, an act or thing:
(a) the body corporate has power to cause the subsidiary to do, or to refrain from doing, the act or thing; and
(b) the subsidiary has power to do, or to refrain from doing, the act or thing;
despite anything in the subsidiary's constitution or any contract or arrangement to which the subsidiary is a party.
Variation and revocation of directions
(8) APRA may, by notice in writing to the body corporate, vary the direction if, at the time of the variation, it considers that the variation is necessary or appropriate.
(9) APRA may, by notice in writing to the body corporate, revoke the direction if, at the time of the revocation, it considers that the direction is no longer necessary or appropriate.
(10) Part VI applies to a decision to give a direction:
(a) under subsection (1) as a result of the ground referred to in paragraph (1)(a), (b), (c) or (d); or
(b) under subsection (1A) as a result of the ground referred to in paragraph (1A)(a), (b) or (c); or
(c) under subsection (1C) as a result of the ground referred to in paragraph (1C)(a) or (b), to the extent that the paragraph relates to a ground referred to in paragraph (1A)(a), (b) or (c).
(11) In this section, the expression director has the same meaning as it has in the Corporations Act 2001 , and the affairs of a body corporate include those set out in section 53 of that Act.
Note: Senior manager is defined in section 3 of this Act.