In our last Bulletin we looked at the recent changes to the
regulation of Direct Offshore Foreign Insurers (known as DOFIs)
under the Financial Sector Legislation Amendment (Discretionary
Mutual Fund and Direct Offshore Foreign Insurers) Act 2007
(Amending Act). To recap, the Amending Act amends,
relevantly, the Corporations Act 2001 (Cth)
(Corporations Act) and the Insurance Act
1973 (Cth) (Insurance Act). The changes took
effect on 1 July 2008.
The amendments to the Corporations Act provide that an
Australian Financial Services Licensee (AFSL) or
an authorised representative of that AFSL must not deal in a
general insurance product if the insurer of the product is not one
of the following:
a "general insurer" within the meaning of
the Insurance Act; or
a Lloyd's underwriter within the meaning of the Insurance
a person that the Australian Prudential Regulation Authority
(APRA) has determined the requirement to be
authorised under the Insurance Act does not apply.
A "general insurer" includes a foreign
insurer but that insurer must be authorised under section 12 of the
Insurance Act to carry on insurance business in Australia. The
Insurance Act has been amended to clarify what it means to carry on
business in Australia. A person is now taken to carry on insurance
business in Australia if:
the person carries on business outside Australia that, under
the Insurance Act, would constitute insurance business if it were
carried on in Australia; and
another person in Australia acts directly or indirectly on
behalf of that person or as a broker (or directly or indirectly on
behalf of such a broker) in relation to the business carried on
Unless an exemption applies, it will be an offence for a DOFI to
carry on insurance business in Australia without being authorised
under the Insurance Act and thereby become subject to
Australia's prudential regime.
The Government has now formulated a number of limited
exemptions. These are effected in the Insurance Amendment
Regulations 2008 (Cth) which amends the Insurance
Regulations 2002 (Cth). The changes were implemented on 1 July
2008 to coincide with the Amending Act.
The Regulations specify that there are exemptions in four
circumstances. The first exemption is for what is known as
'high-value' insureds. This exemption applies where the
insured is the policyholder and either alone, or as part of a
related group, has operating revenue derived in Australia for a
financial year of at least AUD200 million, or has gross assets in
Australia of AU$200 million or more, or has total employees in
Australia of 500 or more. The figures are to be worked out by
averaging the revenue, assets or employees at the end of each of
the previous three financial years.
The second exemption is for 'atypical risks'. Atypical
risks are defined in the Regulations to be policies which provide
cover for loss or liability arising from the hazardous properties
of nuclear fuel, material or waste, the hazardous properties of
biological material or waste, war, terrorism, health-care related
research, the operation of a space object, the ownership or
operation of an aircraft, shipowners' liability, equine
mortality or fertility risks. The exemption applies to the
insurance policy but only to the extent that it deals with an
Insurance that can not be reasonably placed in Australia is the
third exemption. The broker is required to verify this and must be
satisfied, on reasonable grounds, that there is no Australian
insurer who can insure against the risk, or that the terms
(including price) quoted by the Australian insurer are
substantially less favourable to the insured than that quoted by
the overseas insurer, or generally, because of other circumstances,
the insurance with an Australian insurer would be substantially
less favourable to the insured.
The final exemption is where an insurance policy is required by
the law of a foreign jurisdiction.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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The failure of a party to call a witness does not necessarily give rise to an adverse inference being drawn in accordance with Jones v Dunkel (1959) 101 CLR 298. An unfavourable inference is drawn only if evidence otherwise provides a basis on which that unfavourable inference can be drawn.
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