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Introduction of measures by the Government to protect life and general insurance policy holders



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TREASURER

PRESS RELEASE I v— -v

*2

NO. i

EMBARGO 8pm, 6/6/91

STATEMENT BY THE TREASURER, JOHN KERIN, MP

INTRODUCTION OF MEASURES BY THE GOVERNMENT TO PROTECT LIFE AND GENERAL INSURANCE POLICY HOLDERS

The Treasurer, John Kerin, today announced that a comprehensive package of insurance legislation had been introduced into the Parliament.

The package will implement a range of previously announced measures to provide financial support to policy holders of Occidental Life Insurance Company of Australia Limited and Regal Life Insurance Limited, and to increase the general

level of prudential protection provided to life and general insurance policy holders.

The package of Bills falls into four categories:

* The first involves amendments to the Life Insurance Act and Insurance Act to improve the financial and prudential standards which must be satisfied by life and general insurance companies.

These amendments include: 1

. increased minimum capital requirements for life and general insurers and additional solvency requirements for general insurers;

. improvements in the provisions of both Acts in respect of company investigations; and

. measures to disqualify any person who has been bankrupt, or convicted of an offence relating to insurance law or dishonest conduct, from acting as a director or senior manager of an insurance

company.

"The Government is introducing these measures to overcome a number of deficiencies in the two Acts which became evident during the investigation into the affairs of Occidental Life and Regal Life at the end of

last year, and as a result of other developments in the life and general insurance industries," Mr Kerin said.

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"The measures in some cases represent a bringing forward of proposals from the current review of the Life Insurance Act 1945. In part, this review will deal with a number of complex technical issues including possible future solvency standards and the controls to be observed in respect of new life insurance products. The review is expected to result in further amendments to the Life Insurance Act in 1992."

The second set of amendments involves the introduction of legislation, not dissimilar to the Foreign Acquisitions and Takeovers Act, to provide a mechanism for the prior screening of changes to the ownership and

control of life and general insurance companies.

Anti-avoidance provisions in the Insurance Acquisitions and Takeovers Bill will enable the Treasurer may make orders to block or unwind schemes entered into after 6 June 1991 if it is found that the primary purpose of such a scheme is to avoid the provisions of the Bill.

"The need for the type of legislative controls provided for in this Bill was demonstrated by the circumstances leading up to the attempted sale of Occidental Life and Regal Life," Mr Kerin said.

"In that case, the Insurance and Superannuation Commissioner only became aware that steps were being taken to arrange for the sale of the two companies shortly before the transaction took place. His attempts to obtain precise and detailed information concerning the proposed transaction were frustrated by the lack of formal authority to investigate the matter properly."

A further category of legislative measures will put in place levy arrangements to ensure that an appropriate degree of protection is provided to policy holders of Occidental Life and Regal Life.

"In developing these arrangements, the Government had particular regard to the importance of the life insurance industry to the Australian economy as a repository of long term personal and retirement

savings. It also had regard to the special and unusual circumstances involving the unauthorised dealing in statutory funds moneys and the need to carefully balance the interests of policy holders of Occidental

Life and Regal Life and those of policy holders generally."

"In line with the Government's announcement of 11 February 1991 concerning the proposed levy arrangements, the Bill also contains provisions which

will limit the total amount of levy which may be collected under the legislation to $65 million,1 1 Mr Kerin said.

* The final category of amendments will provide for an increase in the life and general insurance supervisory levies to achieve recovery of costs arising as a result of the improved supervisory measures being provided for

in this package of Bills.

Taking the package as a whole, the Bills will bring about important improvements in the insurance supervisory systems and will generally add to the level of protection available to the insuring public.

CANBERRA ACT 6 JUNE 1991

Contact Officer: Insurance and Superannuation Commission

Mr F.I. Keenan - (06) Mr T.J. Thomas - (06) 267 6808 (business) 267 6975 (business)