INSURANCE REGULATIONS (AMENDMENT) 1994 NO. 277

INSURANCE REGULATIONS (AMENDMENT) 1994 NO. 277

STATUTORY RULES 1994 No. 277

ISSUED BY THE AUTHORITY OF THE TREASURER

Insurance Act 1973

Insurance Regulations (Amendment)

The Insurance Act 1973 ('the Act") provides a scheme for the prudential supervision of private sector general insurance companies carrying on insurance business in Australia. The Act applies to both direct underwriters and reinsurance companies. The Act is not concerned with contractual arrangements between policyholders and insurers or with controlling rates of premiums charged. It is concerned only with the solvency of those carrying on insurance business and, therefore, their ability to meet claims as they arise. This prudential supervision is carried out by the Insurance and Superannuation Commission ('ISC'). Section 132 of the Act provides for the making of Regulations by the Governor-General.

To enable the ISC to fulfil its functions the Act requires insurers to submit quarterly and annual returns. Each return involves the insurer submitting the information required by the applicable prescribed forms. These forms are set out in the Insurance Regulations.

The regulations will change the information that is required to be included in the prescribed forms. The regulations have been developed in consultation with representatives of the general insurance industry and will:

-       streamline the reporting requirements imposed on insurers;

-       enable statistical information to be more easily produced;

-        ensure that information requested of reinsurers better reflects the unique nature of that business.

More specifically the Regulations will:

•       eliminate Form 19 - which has proved to be of little benefit in monitoring the financial position of insurers;

•       reduce the amount of information which is collected in Forms 4, 5 to 9, 11, 16 and 18 which can be more appropriately dealt with by certification by either an actuary or an auditor;

•       introduce a new format for certain forms with respect to reinsurers; and

•       round figures- reported to the nearest $1,000 (currently $1).

The regulations are described in detail in the attachment.

ATTACHMENT

Insurance Regulations (Amendment)

Regulation 1 - Amendment

Regulation 1 indicates that the regulations amend the existing Statutory Rules known as the Insurance Regulations (Statutory Rules 1974 No. 141 as amended). In accordance with section 48 of the Acts Interpretation Act 1901. the amending regulations commence upon their notification in the Gazette.

Regulation 2 - Interpretation

Regulation 2 inserts a new sub-regulation 2(2A) which clarifies how monetary amounts are to be indicated in prescribed forms. The sub-regulation states that when a prescribed form requires an insurer to indicate a monetary amount, that amount is to be rounded to the nearest $1,000 or multiple of $1,000.

Regulation 3 - Classes of insurance business

Under section 42 of the Insurance Act 1973 ('the Act') insurers are required to maintain separate accounts in respect of each 'class of insurance business' prescribed by the regulations. Regulation 3 substitutes a new definition of 'classes of insurance business'. The new regulation mirrors the previous definition with respect to its application to business carried out by direct underwriters. but provides a separate definition in respect of reinsurance business. This distinction is warranted by the different nature of the two types of insurance business, and the associated difficulty reinsurers had in complying with the previous generally applicable definition. In addition, as a result of these changes,, more useful information will be provided to the Insurance and Superannuation Commission thereby enhancing its supervisory capabilities.

Regulation 4 - Forms of certain statements

Regulation 4 is a technical amendment.

Regulation 5 - Schedule (Forms)

Regulation 5 substitutes a new set of prescribed forms, replacing those in the Schedule (Forms). The new forms have been developed after extensive consultation with the general insurance industry and have been re-drafted so as to:

•       streamline the reporting requirements imposed on insurers;

•       enable statistical information to be more easily produced;

•       ensure that information requested of reinsurers better reflects the unique nature of that business.