Commonwealth Numbered Regulations - Explanatory Statements

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INSURANCE REGULATIONS (AMENDMENT) 1996 NO. 302

Statutory Rules 1996 No. 302

Issued by the Authority of the Assistant Treasurer

Insurance Act 1973

Insurance Regulations (Amendment)

Section 132 of the Insurance Act 1973 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters that are required or permitted by this Act to be prescribed, or are necessary or convenient to be prescribed, for carrying out or giving effect to the Act.

The legislation

Section 44 of the Act requires a body corporate authorised to carry on insurance business to lodge with the Commissioner specified accounts and statements in respect of each financial year as well as quarterly statements. The Insurance Regulations prescribe forms of various accounts and statements for these purposes.

The purpose of the legislation

The main purpose of S.44 and related Regulations is to facilitate financial reporting of insurance companies to the Insurance and Superannuation Commission (the Commission) in order to enable the Commission to exercise its financial supervisory role. Statutory forms prescribed under Insurance Regulations enable the provision of information necessary to monitor the solvency and overall financial position of authorised insurers. In particular, Form 4 and Form 16 of the Insurance Regulations enable annual and quarterly reporting on assets and liabilities, while Form 9 relates to the annual statement of general expenses.

The purpose of amendments

The purpose of the amendments is to make changes to Form 4 Part B, Form 16 Part D and Form 9 of the Insurance Regulations.

The main purpose of the amendments to Form 4 Part B and Form 16 Part D is to increase controls over the use of derivatives by insurance companies. The new Schedule x to Form 4 Part B and Form 16 Part D of the Insurance Regulations enables the Commission to obtain, both quarterly and annually, information on:

*       whether an insurer is engaged in derivative transactions and if so, for what purposes (speculative or hedging);

*       whether an insurer engaged in derivative transactions has in place a Risk Management Statement (RMS) approved by the Board and if so, whether compliance is confirmed by internal audit;

maximum exposures at the end of a reporting period and limits for these exposures as imposed by the RMS.

The purpose of the amendment to the Form 9 is to achieve greater accuracy. A new "total" at ADP 19 is added which assists in providing more precise information on a company's general expenses.

Costs, benefits and consultation

The amendments improve the supervision and increase the accountability of the industry, while introducing no additional compliance costs or adverse effects on competition. The amendments were developed in consultation with the industry and other interested parties.