Commonwealth Consolidated Acts

INSURANCE ACT 1973 - SECT 2A

             (1)  The main object of this Act is to protect the interests of policyholders and prospective policyholders under insurance policies (issued by general insurers and Lloyd's underwriters) in ways that are consistent with the continued development of a viable, competitive and innovative insurance industry.

             (2)  This Act, and the prudential standards determined by APRA under this Act, achieve this mainly by:

                     (a)  restricting who can carry on insurance business in Australia by requiring general insurers, and the directors and senior management of general insurers, to meet certain suitability requirements; and

                     (b)  imposing primary responsibility for protecting the interests of policyholders on the directors and senior management of general insurers; and

                     (c)  imposing on general insurers requirements to promote prudent management of their insurance business (including requirements concerning capital adequacy, the valuation of liabilities, reinsurance arrangements and the effectiveness of risk management strategies and techniques); and

                     (d)  providing for the prudential supervision of general insurers by APRA; and

                     (e)  providing for judicial management of general insurers whose continuance may be threatened by unsatisfactory management or an unsatisfactory financial position, so as to protect the interests of policyholders and financial system stability in Australia; and

                      (f)  providing for policyholders, who have valid claims connected with certain policies issued by certain general insurers that are under judicial management and that APRA believes are insolvent, to be paid by APRA the amounts to which the policyholders are entitled before they would receive payment in winding up of the general insurers.

             (3)  Generally, the provisions of this Act apply to general insurers. However, there are a number of special provisions that apply only to Lloyd's underwriters.