INSURANCE ACT 1973 - SECT 116A Assets and liabilities in Australia

INSURANCE ACT 1973 - SECT 116A

  (1)   For the purposes of sections   28, 62M, 62ZZC and 62ZZE, an amount is taken to be an asset in Australia of a general insurer if:

  (a)   the insurer expects to recover the amount under a contract of reinsurance entered into with a person who is outside Australia; and

  (b)   the amount relates to claims in respect of liabilities in Australia of the insurer, whether or not the claims have been paid by the insurer; and

  (c)   under the terms of the contract, payments by way of reinsurance are to be made in Australia.

Note 1:   Section   28 requires general insurers to hold sufficient assets.

Note 2:   Section   62M provides for the appointment of a judicial manager for a foreign general insurer if its assets in Australia referred to in that section are, or are likely to become, insufficient to enable it to meet its liabilities in Australia other than pre - authorisation liabilities as they become due.

Note 3:   Sections   62ZZC and 62ZZE are concerned with APRA believing a foreign general insurer is unable to pay, from its assets in Australia referred to in those sections, all its debts that are liabilities in Australia other than pre - authorisation liabilities, as and when those debts become due and payable.

  (2)   For the purposes of sections   28, 62M, 62ZZC, 62ZZE and 116, a liability is taken to be a liability in Australia of a general insurer if it is undertaken by the insurer under a contract of insurance (including reinsurance) made in Australia or in respect of which a proposal was accepted or a policy issued in Australia, other than a contract:

  (a)   that relates only to a liability contingent on an event that can happen only outside Australia, not being a liability that the body corporate has undertaken to satisfy in Australia; or

  (b)   if the insurer carries on insurance business both in and outside Australia--that relates only to a liability that the insurer has undertaken to satisfy outside Australia.

Note:   Subsection   116(3) gives priority to discharge of liabilities in Australia when a general insurer is being wound up.

  (3)   For the purposes of sections   28, 62M, 62ZZC, 62ZZE and 116, a liability is also taken to be a liability in Australia of a general insurer if it is undertaken by the insurer under a contract of insurance (including reinsurance) made outside Australia or in respect of which a proposal was accepted or a policy issued outside Australia, if the contract:

  (a)   relates to a liability contingent on an event that can happen only in Australia; or

  (b)   if the insurer carries on insurance business both in and outside Australia--relates to a liability that the insurer has undertaken to satisfy in Australia;

and any part of the negotiations or arrangements leading to the making of the contract, the acceptance of the proposal or the issue of the policy took place or were made in Australia.

  (4)   For the purposes of sections   28, 62M, 62ZZC, 62ZZE and 116, unless the contrary intention appears, a reference to liabilities of a body corporate includes a reference to provision for liabilities made in its accounts, or directed in accordance with section   104 to be made, but does not include:

  (a)   a liability in respect of share capital; or

  (b)   where the body corporate is registered under section   21 of the Life Insurance Act 1995 , a liability that is, in accordance with that Act:

  (i)   referable to a class of life insurance business carried on by the body corporate in respect of which it has established a statutory fund under that Act; or

  (ii)   charged on any of the assets of such a statutory fund.

  (5)   The whole or such part as APRA determines of an amount owed to a body corporate by way of portions of premiums retained under a contract of reinsurance by a person outside Australia is, for the purposes of sections   28, 62M, 62ZZC and 62ZZE, to be taken to be an asset in Australia of the body corporate.

  (6)   Where:

  (a)   a determination has been made under subsection   (5); and

  (b)   it appears at any time to APRA that the determination is no longer necessary or should be varied;

APRA must, by notice in writing served on the body corporate concerned, revoke or vary the determination, as the case may be.

  (7)   Part   VI applies to a decision by APRA under subsection   (5) or (6) to determine an amount or to vary such a determination.