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IR 07-25 Interim relief for general insurers and actuaries until 31 August 2007

Monday 18 June 2007


ASIC has announced the extension of existing transitional relief for general insurers and actuaries.

In both cases, the extension of relief is until 31 August 2007.

General insurance transitional disclosure relief
Corporations Regulations 7.9.15D–7.9.15F modify the application of financial services disclosure provisions to general insurance products. These regulations have a transition period which expires on 20 June 2007. During the transition period, general insurers can either comply with the modified disclosure requirements, or continue to comply with the provisions as they stood before the modifications. ASIC’s relief, provided under ASIC Class Order [CO 07/409] General Insurance Disclosure: Extension of Transitional Period, extends the transition period in the regulations until 31 August 2007.

On 12 February 2007, the Government announced amendments to the Insurance Contracts Act 1984, which will, amongst other things, affect the disclosure that must be provided by insurers within insurance contracts. On 26 March 2007, the Government announced proposed new Corporations Amendment Regulations to simplify the financial services regime. Amongst other things, these new regulations will modify financial services disclosure provisions, including in relation to dollar disclosure provisions for general insurers. Both of these sets of legislative changes will require insurers to make changes to their disclosure documentation.

ASIC’s [CO 07/409] will extend the period of time before general insurers have to comply with the disclosure obligations in Corporations Regulations 7.9.15D–7.9.15F. This will enable general insurers to update their disclosure documents at one time, following the commencement of new requirements in the Insurance Contracts Act 1984 and proposed new Corporations Amendment Regulations announced by the Parliamentary Secretary to the Treasurer on 26 March 2007.

Licensing relief for actuaries
ASIC has also issued an extension of the licensing relief that actuaries have from the requirement to hold an Australian Financial Services Licence (AFSL). ASIC’s current relief would otherwise have ceased on 30 June 2007. The extension of the relief is provided under ASIC Class Order [CO 07/410] Actuaries: Further Extended Transitional Relief and means that actuaries who can rely on the Class Order will be exempt from holding an AFSL until
31 August 2007.

The short extension has been given by ASIC so that actuaries can continue to have the benefit of the current relief until the commencement of a regulation later this year that should exclude actuaries from the licensing requirements under the Corporations Act 2001 (the Act) when providing the usual professional services of an actuary.

Background


General insurers disclosure relief
Regulations 7.9.15D and 7.9.15F vary s1013C–D of the Act to allow some content that would be required in most PDSs (such as the disclosure of significant risks) to be removed for general insurance products. Regulation 7.9.15E varies s1013D of the Act to require additional disclosure about the terms and conditions of the general insurance policy and information about rights under the Insurance Contracts Act 1984.

Schedule 5 item 2 of the Corporations Amendment Regulations 2005 (No. 5) put in place a transitional period, allowing insurers to either comply with ss1013C–D as modified, or continue to comply with the old provisions. This transitional period commenced on the day the regulations came into effect, 19 December 2005, and will now end on 31 August 2007.

Review of the Insurance Contracts Act

On 10 September 2003, the then Minister for Revenue and Assistant Treasurer, Senator the Hon Helen Coonan, and the then Parliamentary Secretary to the Treasurer, Senator the Hon Ian Campbell, jointly announced a review of the Insurance Contracts Act 1984 by the Federal Government.

As a result of the review, a new legislative package has been drafted to address the Review Panel’s key recommendations. Amongst other changes, this will affect the disclosure that must be made by insurers within insurance contracts.

The draft legislation is available at http://icareview.treasury.gov.au/.

New Corporations Regulations

On 26 March 2007, the Parliamentary Secretary to the Treasurer announced the Government’s proposed new Corporations Amendment Regulations. These will amend the Corporations Regulations to simplify the financial services regime, including the dollar disclosure provisions for general insurers.

More information about the new regulations is available at http://parlsec.treasurer.gov.au/cjp/content/pressreleases/2007/015.asp.

Licensing relief for Actuaries
Under s911A of the Act, a person who carries on a financial service business is required to hold an AFSL to perform the activities and services provided as part of that business. Corporations Regulation 7.1.29 provides an exemption from the need to be licensed for certain classes of professional activities. Actuaries have previously
raised concerns that the categories of exemption from licensing may not apply to all aspects of their ordinary business.

In response, ASIC issued Class Order [CO 03/1096] Actuaries, to provide temporary relief to certain types of actuaries from the requirement to hold an AFSL when providing the usual professional services of an actuary. To allow additional time for the Government to finalise its position on the regulation of actuaries, the original relief was then extended under the following class orders:

Class Order [CO 05/680] Transitional relief for actuaries
Class Order [CO 05/1194] Actuaries — amendment
Class Order [CO 06/469] Further transitional relief for actuaries
Class Order [CO 06/1012] Variation of Class Orders [CO 03/1096] and [CO 06/495]

New Corporations Regulations

The Government’s proposed new Corporations Amendment Regulations, referred to above, will also amend the Corporations Regulations to provide an exemption from licensing provisions for actuaries undertaking the ordinary activities of their business.

More information about the new regulations is available at http://parlsec.treasurer.gov.au/cjp/content/pressreleases/2007/015.asp.
Further Background Information
Further background information is provided in ASIC Information Release [IR 05-37] ASIC further extends interim relief for actuaries, Information Release [IR 06-19] ASIC further extends interim relief for actuaries and general insurers, Information Release [IR 03-43] ASIC provides temporary relief during period of consultation, and [IR 06-46] ASIC further extends interim relief for actuaries.


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