REP 107 Compensation arrangements for financial services licensees: Research into the professional indemnity insurance market

Released December 2006.

Prepared by Melzan Pty Ltd for release with CP 87 Compensation and insurance arrangements for AFS licensees. 

The Australian Government has announced its intention to introduce regulations which will give effect to Section 912(B) of the Financial Services Reform Act (FSRA) in 2007, to provide a source of compensation for retail clients in circumstances where a licensee breaches its license obligations.

  • Professional Indemnity Insurance (PII) is commonly used by professionals to manage their risk exposures and indemnify them for their liabilities to clients.
  • The draft regulations propose inter alia to require licensees to have adequate PII arrangements.
  • This report documents research into the current and prospective conditions in the Australian insurance market for PII especially for small and medium size businesses.
  • It examines aspects of availability, affordability, the level of cover purchased, excesses carried, and importantly the scope of cover provided by different policies and the extent to which their policies meet licensees’ risk exposures and obligations under the Act.
  • The report also considers the factors that need to be taken into account in arranging insurance, the scope of what may be considered ‘adequate’, ‘best practice’ and ‘ideal cover’ and makes certain recommendations about providers, disclosure and transitionary arrangements.

Download REP 107 (PDF 311 KB) | Read the information release

Read CP 87

Last updated: 23/07/2007 12:00