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Thursday, 18 October 1984
Page: 1997

Senator Dame MARGARET GUILFOYLE(5.01) —I move:

That the Senate take note of the paper.

In the time available to me I wish to refer to a couple of things mentioned in the tenth annual report of the Insurance Commissioner. Item 10 on page 9 of the report, headed 'Continuing supervision of insurers', is one to which I draw attention. The outline of the supervision of insurers embodied in the Insurance Act 1973 is referred to and, as the Commissioner says, this 'relies, in the main , upon the timely submission of monthly, quarterly and audited annual financial and other returns by all authorised insurance companies'. The Commissioner went on to say:

The examination and review of the statutory returns forms the basis of the scheme of supervision imposed by the Act.

One or two other matters to which he refers I find of interest. He states:

One aspect of the industry that has been of continuing concern to my Office has been the standard of accounting records maintained in Australia by certain authorised companies and in particular by certain Australian authorised branches of overseas . . . companies.

He states that his officers 'will be paying close attention to the adequacy of accounting records in order to ensure that all companies, regardless of overseas or group affiliation, maintain accounting records in Australia which satisfy the requirements of the Act'. I feel sure that we would all agree that that is essential. It is also of interest that he makes reference to the accounting standards for the general insurance industry. This comment is made:

Previous Reports have commented on action taken by the Australian Accounting Research Foundation to develop an accounting standard for the general insurance industry and have noted the appointment of Coopers and Lybrand, Chartered Accountants as project contractors. An extensive questionnaire was prepared by the project contractors and circulated in May 1982 to all insurers to obtain information on the various accounting practices adopted. The results of this questionnaire have been analysed by the contractor and a discussion paper summarising the accounting issues pertinent to the industry is being drafted. The distribution of this discussion paper to interested persons for comment and debate is expected shortly.

No indication has been given as to when the development of this vitally important standard may be expected to be finalised.

I think it is important that the discussion paper is made available to those who would either need to be interested in the legislation covering the industry or who may wish to make submissions on the adequacy of accounting records in the insurance industry. There are other things referred to in the report, such as the statutory solvency margin of insurers. The question is raised as to whether this is appropriate to all circumstances, and whether the statutory solvency margin, which has regard to both premium income and outstanding claims, may be appropriate for future consideration. Such things as that and the accounting records are of interest, and I think it is timely that the Commissioner has referred to them. The further matter that I find of interest is his comment in regard to specialist reinsurance companies:

. . . authorities to carry on insurance business granted to specialist reinsurance companies have to date been subject to special conditions in respect of the time lags associated with reinsurance. These conditions were applied as a result of the industry making representations concerning the difficulties a specialist reinsurer encounters in determining the financial results of its business.

The Commissioner's comments show that he is obviously reviewing the requirements of specialist reinsurance companies. He is looking at the time lags. The Commissioner also states:

This practice does not satisfy the technical requirements of the Act, is not adequate for the purpose of supervision nor is it adequate for other financial reporting purposes.

I would be interested in his future report on specialist reinsurance companies. In particular, I rose to draw attention to the need for proper accounting standards in anticipation of the discussion paper and to our capacity to make some contributions to it for consideration by the Government.