AFSL holders and entities placing insurance with a DOFI through an AFSL holder.
What do you need to do?Consider making a submission to Treasury. Submissions on the draft regulations are due on Monday 2 June 2008.
Partner
T +61 2 9296 2213
Sydney
Peter Stockdale
Ann Newbrun
Brisbane
Justin McDonnell
Canberra
John Topfer
Author
Ann Newbrun
Treasury has today published on its website draft regulations to complement the DOFI reforms (see link). Submissions on these draft regulations are due on Monday 2 June 2008.
Reporting requirement - DOFIs
The new reporting requirements apply from 1 October 2008 to Australian financial services licensees (AFS licensees) who provide a financial service that results in a person entering into an exempt offshore insurance contract with a direct offshore foreign insurer - DOFI.
The AFS licensee must provide the following information to ASIC:
- which exemption applies to the transaction - ie high-value insured exemption, atypical risks exemption, customised exemption or foreign law exemption
- kind of loss or liability insured
- premium payable, and
- name of the DOFI and its country of domicile.
Where there is more than one AFS licensee involved in the insurance transaction, one of which is an insurance broker, the proposed regulations place the reporting obligation on the broker. Where there is more than one broker involved in a transaction, the broker who dealt directly with the client is required to provide the information to ASIC.
This proposal is consistent with the overall policy of the DOFI regulations. The information will enable the regulators to track the impact of the new regime, in particular, whether the exemptions are achieving the desired outcome over time. It will also assist ASIC in undertaking its compliance activities.
AFS licensees who provide financial services involving DOFIs should consider the way in which these new requirements will impact their business in practice.
Reporting requirement - DMFs
Similarly, an AFS licensees that places business with a discretionary mutual fund - DMF, will be required to provide information to ASIC about that business.
Disclosure requirement - DOFIs
From 1 July 2008, where an insurance policy is placed with a DOFI under the atypical or customised exemption, and the insured is a wholesale client, a notice must be provided to the insured setting out that:
- the insurer is not an authorised insurer under the Insurance Act 1973
- the insurer is not subject to financial supervision in Australia, and
- the insured should consider seeking further information about the country in which the insurer is incorporated, whether there is financial supervision of insurers in that country, the paid up capital of the insurer and which country’s laws will be used in disputes in relation to the policy.
This notice replicates the notice that must currently be given to retail clients.
Disclosure requirement - DMFs
The obligation to provide a Product Disclosure Statement is extended to wholesale clients of DMFs.