CIRCULAR INSURANCE AND SUPERANNUATION COMMISSION CIRCULAR TO ALL LIFE INSURANCE COMPANIES: A.2 ALL REGISTERED INTERMEDIARIES: AB2/98 ALL GENERAL INSURANCE COMPANIES AND APPROVED AUDITORS: G3/98 COMMENCEMENT OF AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY AND AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION JUNE 1998 November 2001 1-10
THE ROLE OF THE AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY (APRA) AND THE AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION (ASIC). The purpose of this is to advise insurers and insurance intermediaries about new administrative arrangements for prudential supervision and financial sector market integrity/consumer protection from 1 July 1998. It should be read by staff responsible for: liaison with government; compliance with Commonwealth legislation; compliance with industry codes of practice. Recommendation 31 of the Report of the Financial System Inquiry (1997) recommended: A single Commonwealth agency, the Australian Prudential Regulation Commission (APRC), should be established to carry out prudential regulation in the financial system. The recommendation was adopted by the Government last September, noting a change to the name of the agency to the Australian Prudential Regulation Authority (APRA). The first package of legislation in respect of the establishment of APRA was recently passed by the Parliament, and provided for the commencement of APRA with effect 1 July 1998. New administrative arrangements From 1 July 1998, the following legislation of direct relevance to insurers and insurance intermediaries will be administered by the Australian Prudential Regulation Authority (APRA): Australian Prudential Regulation Authority Act 1998 (new Act to allow APRA to undertake the prudential supervision of deposit taking institutions, life and general insurance companies and superannuation funds) Insurance Act 1973 (Insurance Act), except for Section 113; Life Insurance Act 1995 (Life Act), except for Part 10 Divisions 1-3 and 5-8; Insurance Acquisitions and Takeovers Act 1991 (Acquisitions and Takeovers Act); Financial Institutions Supervisory Levies Collection Act 1998 (new Levy Collection Act - replaces existing legislation); General Insurance Supervisory Levy Imposition Act 1998 (new Levy Imposition Act - replaces existing legislation); Life Insurance Supervisory Levy Imposition Act 1998 (new Levy Imposition Act - replaces existing legislation). The Insurance (Acquisitions and Takeovers Act) 1991 has been amended to repeal Part 2 dealing with shareholdings in Australian registered insurance companies and related companies. The regulation of insurance company shareholding is now a matter covered by the new Financial Sector (Shareholdings) Act 1998, administered by the Treasury, which implements a standardised regime to promote widespread ownership of deposit taking institutions and insurance companies. November 2001 2-10 LIFE No.A.2
The Australian Securities and Investments Commission (ASIC) will, from 1 July, be responsible for financial sector market integrity and consumer protection. The previous roles of the ISC and the Australian Competition and Consumer Commission in relation to consumer protection and market integrity in the financial services sector will transfer to ASIC from that date. The following legislation of direct relevance to insurers and insurance intermediaries will therefore be administered by ASIC: Insurance Contracts Act 1984 (Insurance Contracts Act); Insurance (Agents & Brokers) Act 1984 (Insurance Agents and Brokers Act); Section 113 of the Insurance Act (code of practice requirement for general insurers); Life Insurance Act 1995 Part 10 Divisions 1-3 and 5-8. The ISC will cease to exist on and from 1 July. Legislative Implications for Life Industry Stage One Legislation - 1 July 1998 The Stage One legislation provides for the establishment of APRA and of ASIC - the agency for regulation of market conduct and disclosure. The legislation providing for the establishment and powers of the ISC is repealed; the relevant prudential powers being transferred to APRA. The existing legislative framework in respect of life insurance remains predominantly unchanged at this stage. The responsibility for particular regulatory provisions of the Life Act has been allocated as between APRA and ASIC according to the nature of those provisions as prudential or market conduct respectively. In the case of the Life Act, this allocation process results in all parts of the Act, with the single exception of Part 10 Divisions 1-3 and 5-8, being the responsibility of APRA. All corresponding subordinate legislation - Regulations, Commissioner s Rules (now called Prudential Rules) and Actuarial Standards - similarly, remain predominantly unchanged and become the responsibility of APRA. It is the intention that the continuity of application of non-legislative instruments - Life Group s - will be endorsed by the APRA Board at an early meeting. The responsibility for market conduct and disclosure regulation has been noted as falling to ASIC. For the life industry this means that the relevant ISC Life Group s - significantly G.I.1 and G.II.1 - will be administered by ASIC. As a transitionary approach, the foreshadowed amendments to G.I.1 (in G.I.3) will be progressed by APRA in consultation with ASIC. Stage Two Legislation Under the new structure for regulation of the financial system, responsibility for the development and implementation of government policy in respect of the financial services industry will become more completely the responsibility of the Treasury Financial Institutions Division (prudential matters) and Business Law Division (market conduct and disclosure matters). November 2001 3-10 LIFE No.A.2
Accordingly the continued progress of the Life Insurance (Conduct and Disclosure) Bill will be the responsibility of Treasury BLD. It has also been announced that stage two of the implementation of the recommendations of the Financial System Inquiry will consider the incorporation of State-based financial institutions within the Commonwealth legislative framework. It is anticipated that amendment to the Life Act will result from these processes. In particular, Treasury, in conjunction with the ISC are examining the Life Act for use as the legislative vehicle for prudential regulation of Friendly Societies (to the extent they undertake financial activities). The target date at which the State-based institutions will come under Commonwealth jurisdiction is 1 December 1998. Operational Implications for the Insurance Industry Prudential Supervision - Life and General Insurance Operationally, there will be no change for life companies in the short term in respect of the administration of prudential regulation. The Life Group of the ISC will become the Life Group within APRA, and its responsibilities and administrative activities will be unchanged. Operations will continue out of Canberra for the short term, with the continuity of the small Sydney branch office. The staff of the General Insurance Group of the ISC involved with the authorisation and prudential supervision of general insurers will continue this function as the General Insurance Group of APRA. There are no planned changes to the way in which the Group undertakes this function in the immediate future. This means that, for the short term at least, contact addresses, telephone and fax numbers, and staff contacts will not change. Attachment 1 shows the interim structure of APRA, and illustrates the minimal structural impact on the ISC. Market Supervision - Insurance Intermediaries under the Insurance Agents and Brokers Act From 1 July this will be the responsibility of ASIC. From that date all communication with brokers and foreign insurance agents will be made by ASIC staff, and correspondence, application forms, accounts and fees will have to be sent to ASIC, at the following address: Australian Securities and Investments Commission GPO Box 9827 MELBOURNE VIC 3001. Contact phone numbers supplied by ASIC are set out in Attachment 2 to this. November 2001 4-10 LIFE No.A.2
Market Conduct Supervision - Life Operational changes will result from the transfer of these responsibilities to ASIC. The following sets out the administrative arrangements that have been agreed with ASIC, to commence from 1 July 1998: all Customer Information Brochures should be lodged directly with ASIC, but otherwise in accordance with the requirements of G.I.1. ASIC will forward one of the two copies lodged to APRA for its prudential purposes. Refer to Attachment 3 for CIB lodgement details. half yearly Code statistical returns (Prudential Rules No 26 - Schedule 2) should be lodged with APRA. APRA will make the statistical information available to ASIC using existing system functionality. (In this way the recently developed diskette lodgement process will continue, for the benefit of industry and APRA/ASIC). all correspondence in respect of Unclaimed Monies under section 216 of the Life Act should be lodged with ASIC. Market Conduct Supervision - General Enquiries about the Insurance Contracts Act and the Insurance Agents and Brokers Act, and about codes of practice/dispute settling schemes (including Section 113 of the Insurance Act) should from 1 July be addressed to ASIC. Contact details supplied by ASIC are in the attachment to this. The current complaints handling mechanisms will remain, with contacts as follows: For unresolved complaints about general insurers: Insurance Enquiries and Complaints Ltd Phone 1300 363 683 For unresolved complaints about life and general insurance brokers: Insurance Brokers Disputes Facility Phone 1800 064 169 Where you wish to refer such enquiries or complaints to ASIC, for example, to discuss the relevant legislation, or to discuss a dispute which is outside the scope of the industry dispute settling schemes, an appropriate contact in the first instance is the ASIC Infoline number, 1300 300 630, between 9.00 am and 5.00 pm. Codes of Practice, Dispute Settling Schemes, and administration of the Insurance Contracts Act. The ISC will no longer be represented on the management boards of industry codes of practice or dispute settling schemes, such as the Board of Insurance Enquiries and Complaints Ltd, The Board of the Life Insurance Complaints Service, The Council of the FPA Complaints Resolution Scheme or on the Insurance Brokers Compliance Council. The ASIC representation on panels such as these is currently under consideration. November 2001 5-10 LIFE No.A.2
From 1 July 1998, enquires about compliance with the Insurance Contracts Act and about all financial system codes of practice and disputes settling schemes should be addressed to ASIC. Contact phone numbers supplied by ASIC are set out in the attachment to this. Tom Karp Acting Commissioner June 1998 November 2001 6-10 LIFE No.A.2
ATTACHMENT 1 APRA - INTERIM STRUCTURE BOARD CEO Graeme Thompson A. Insurance and Superannuation Tom Karp B. Authorised Deposit-Taking Institutions Les Phelps C. Policy Development & Research Brian Gray D. Chief Operating Officer David Knott Life Insurance Craig Thorburn Groups 1 and 2 Ross Ellis Policy-Coordination & Application Graham Johnson Finance & Corporate David Holmesby General Insurance Richard Smith Groups 3 and 4 David Prees Policy Development & Analysis Darryl Roberts Information Technology Peter Bond Superannuation Keith Chapman Market Risk Team Wayne Byres Capital & Risk Methodology (to be determined) Legal Chris Fogarty Actuaries Kevin Deeves Asset Quality Team Greg Brunner Research & Financial Studies (to be determined) Human Resources (to be determined) November 2001 7-10 LIFE No. A.2
ATTACHMENT 2 CONTACTS IN ASIC The ASC s Infoline on 1300 300 630 will find the right ASIC person to answer your questions or concerns. Infoline operates between 9.00am and 5.00pm across Australia for the cost of a local call. Infoline is the most efficient way of having your questions answered. We encourage you to direct queries to it in the first instance. However, for information, we set out below some of the staff contacts in the relevant areas. Issue Registering insurance brokers and foreign insurance agents under the Insurance (Agents and Brokers) Act Unclaimed Monies (under Part X of the Life Insurance Act) Compliance Issues for new consumer functions The Banking Codes of Practice, ie Code of Banking Practice, Building Society Code of Practice, Credit Union Code of Practice and Electronic Funds Transfer Code of Practice The Life Insurance Code of Practice and the General Insurance Code of Practice The Superannuation Complaints Tribunal (SCT) Relevant contacts within ASIC Francis Ong: 03 9280 3369 Frank Varga: 03 9280 3221 Michael Sullivan: 07 3867 4755 Anne-Marie Cox: 07 3867 4806 Annette Donselaar: 03 9280 3630 Peter Kell: 02 9911 2000 Jenny Green: 02 9911 2620 Peter Kell: 02 9911 2000 John Fox: 03 9280 3394 Consumer complaints regarding superannuation funds: 13 14 34 (Toll Free) Policy and administrative issues regarding the SCT: Toula Noutso (SCT): 03 9248 5169 Complaint Resolution Schemes - liaison and development work ASIC Contact: Sarah Edmondson: 03 9280 3303 John Fox: 03 9280 3394 Sarah Edmondson: 03 9280 3303 Consumer complaints: these can be made through the Financial Complaints Referral Centre: a toll free number is available: 1300 780 885 November 2001 8-10
Superannuation - Consumer John Fox: 03 9280 3394 issues Frances Butcher: 02 9911 2000 Life Insurance - Consumer issues John Fox: 03 9280 3394 General Insurance - Consumer Pending announcement: John Fox: 03 9280 3394 issues FSI Policy - Project Management Katerina Speer: 03 9280 3582 Issues FSI Policy Projects - technical issues John Fox (distribution and insurance issues): 03 9280 3394 Stephen Yen (disclosure issues): 02 9911 2053 Donna Croker (disclosure and electronic commerce issues): 03 9280 3301 Wendy McIntyre (disclosure issues): 02 9911 2032 Dhammika Amukotuwa (licensing issues): 03 9280 3395 Legislative Issues (proposed legislative reforms) Andrew Serpell (licensing/distribution issues): 03 9280 3573 Greg Tanzer (ASIC legislation): 02 6250 3887 Andrew Serpell (ASIC legislation): 03 9280 3573 John Fox (consumer issues): 03 9280 3394 Peter Kell (consumer issues): 02 9911 2000 Brendan Byrne (CLERP): 02 9911 2077 Kerrie Palmer (Building Societies, Credit Unions and Friendly Societies): 02 9911 2090 November 2001 9-10 LIFE No.A.2
ATTACHMENT 3 Lodgement of CIB s - ASIC Business Centres Sydney Office Level 8 City Centre Tower 55 Market Street GPO Box 9854 SYDNEY NSW 2001 SYDNEY NSW 2001 Melbourne Office Level 17 CU Tower 485 La Trobe Street GPO Box 9854 MELBOURNE VIC 3001 MELBOURNE VIC 3001 Brisbane Office Level 24 Commonwealth Bank Building 240 Queen Street GPO Box 9854 BRISBANE QLD 4001 BRISBANE QLD 4001 November 2001 10-10 LIFE No.A.2