Insurance Act 1973

The Act applies to general insurers (bodies corporate authorised under s 12), authorised NOHCs, their subsidiaries and related bodies corporate, Lloyd’s underwriters, auditors, actuaries, directors and senior managers. It does not apply to State insurance, Commonwealth insurance or prescribed bodies or kinds of business (s 5). Foreign general insurers are subject to limited provisions excluding non-Australian business (s 62ZVA). APRA has general administration, subject to ASIC’s role under s 114 and ministerial directions (s 8). General insurers (other than foreign general insurers for some removal powers), authorised NOHCs, subsidiaries, corporate agents, their directors, senior managers, officers, employees and contractors, policyholders under protected policies, APRA, judicial managers, statutory managers, external administrators, liquidators and certain Commonwealth officers are directly affected. Part VC entitlements extend to third-party recovery rights under Insurance Contracts Act 1984 s 51, Corporations Act 2001 s 601AG or regulations.

General insurers and authorised NOHCs must comply with prudential standards (s 35), maintain sufficient Australian assets to cover Australian liabilities (s 28), appoint a principal auditor and actuary meeting eligibility criteria (ss 39, 46), notify APRA of specified matters within prescribed times (ss 28A, 38AA), and notify APRA of insolvency risks or significant contraventions (s 49A). Auditors and actuaries must report specified matters to APRA (ss 49A, 49D). Judicial and statutory managers must act efficiently, report to the Court or APRA, and follow directions (ss 62ZG, 62ZOM). APRA may give directions on prudential grounds (s 104) and require information or books (s 115). Policyholders gain rights to financial claims scheme payments on protected policies (ss 62ZZF-62ZZG). APRA and affected persons may seek injunctions (ss 11A, 129D). APRA may direct removal of a director or senior manager who is disqualified or fails fitness and propriety criteria, after written notice and opportunity to make submissions (s 27(2)-(3B)); the direction takes effect at least seven days later (s 27(4)). Entities must comply with prudential standards (s 35) and directions (ss 104, 108). Judicial or statutory management vests board powers in the manager, terminates external administrator appointments and imposes moratoriums (ss 62P-62PB, 62ZOR-62ZOT). FCS claimants must use the approved form within prescribed periods; APRA determines liability and amount (ss 62ZZF, 62ZZI). Recapitalisation directions require share or capital instrument issues despite Corporations Act, constitution or contracts (s 103D(3)). Disclosure of secret directions is permitted only under ss 109B-109G (public information, APRA determination under s 109C, legal advice, APRA Act s 56, regulations or onward disclosure). APRA must publish Gazette notices for standards and certain directions.

Strict liability offences apply to carrying on unauthorised insurance business (ss 9-10, 60 penalty units), breaching authorisation conditions (s 14, 300 penalty units for bodies corporate), failing to hold sufficient Australian assets (s 28, 200 penalty units), breaching conditions of s 7 determinations (s 7A, 60 penalty units), and non-compliance with directions (ss 103M, 108). Concealing books during investigations is an offence (s 87, 6 months imprisonment). Civil penalties apply to certain contraventions (s 129E, Schedule 1). APRA may revoke authorisations (ss 15-16, 21), appoint judicial or statutory managers, apply for winding-up orders (s 62ZU), accept enforceable undertakings (s 126) and publish notices. The Federal Court may disqualify persons from specified roles (ss 25A, 44) and grant injunctions. Non-compliance with a s 27 removal direction is a strict liability offence (300 penalty units for bodies corporate; 60 penalty units ancillary liability for individuals) (s 27(7)-(7A)). Contravention of recapitalisation directions carries 50 penalty units plus daily penalties (s 103M). Failure to comply with investigation notices is an offence (s 56). Civil penalty provisions allow Federal Court pecuniary penalty orders within six years, with involvement treated as contravention and criminal proceedings staying civil ones (Schedule 1, clauses 1, 3, 7). Injunctions are available (s 129D). APRA costs under Part VC have priority in winding up (s 62ZZU).

The Act prevails over inconsistent Corporations Act 2001 provisions in specified respects (s 127E). Judicial and statutory management operate in addition to Chapter 5 of the Corporations Act (ss 62ZP, 62ZV) but displace external administrators (ss 62U, 62ZOQ). Section 440B of the Corporations Act applies by analogy during moratoria (ss 62PC, 62ZOU). The Act does not exclude State or Territory stamp duty, specified contract or investigation laws (ss 99-100, 103). Specific authorisations under the Competition and Consumer Act 2010 apply to acquisitions and arrangements in judicial or statutory management and the financial claims scheme (ss 62ZN, 62ZOZB, 62ZZV). APRA Act s 56 secrecy applies (s 125). Part VI provides for Administrative Review Tribunal review of specified decisions after internal reconsideration (ss 63-64). Part VB moratoriums modify Corporations Act 2001 s 440B and Chapter 5 (ss 62PA, 62PB, 62ZV). Part VC excludes Competition and Consumer Act 2010 Part IV (s 62ZZV) and authorises acquisitions under s 51(1). Directions and management override Corporations Act, constitutions and contracts in specified respects (ss 62ZJ, 103D(3), 127E). Disclosure under ss 109B-109G is not an offence under Australian Prudential Regulation Authority Act 1998 s 56. Service, evidence and undertakings provisions in Part X apply alongside. Foreign general insurers are excluded from judicial and statutory management for non-Australian business (s 62ZVA).

The source notes do not identify any recent amendments or their policy drivers. No changes are recorded in the supplied notes.

The source notes do not identify any court challenges or controversies. No cases are named in the supplied notes.

Authorisation conditions may be imposed, varied or revoked by APRA without prior notice in some cases (s 13). Directions covered by an APRA secrecy determination may not be disclosed except in limited circumstances (ss 109-109G). Judicial and statutory management are not grounds for denial of contractual obligations (ss 62V, 62ZOX, 103K), but certain intra-group transactions require fair value or shareholder approval (s 62ZOE). Foreign general insurers’ non-Australian business is excluded from judicial and statutory management (s 62ZVA). Pre-authorisation liabilities are excluded from Australian liabilities calculations (s 28, s 116(3A)). Lloyd’s authorisation ceases on APRA determination after notice (s 93), with a $2 million security deposit available for trusteeship costs (s 92Q). Disclosure exceptions under ss 109B-109G operate independently and do not limit one another (s 109H). Judicial management does not remove officers from office but invalidates their acts (s 62T). FCS payments discharge only the corresponding portion of entitlements (s 62ZZFA). Recapitalisation directions require expert valuation reports unless APRA determines otherwise on policyholder or stability grounds (s 103E). Self-incrimination does not excuse compliance with investigation notices but limits admissibility (s 56(2)). Moratorium leave is granted only on hardship grounds with notice to APRA and the manager.

Obtain and maintain APRA authorisation (s 12) or NOHC authorisation (s 18), comply with all applicable prudential standards (s 35), appoint and retain qualified auditors and actuaries (ss 39, 46), notify APRA promptly of breaches, financial deterioration or changes (ss 28A, 38AA, 49A), maintain adequate Australian assets (s 28), respond to APRA information requests and directions, and ensure directors and senior managers meet fitness and propriety requirements (ss 24-27). For distressed entities, cooperate with judicial or statutory managers and the financial claims scheme processes. Lloyd’s underwriters must maintain approved security trust funds and an Australian resident agent (ss 68, 95-96). Provide prior written notice and reasonable opportunity for submissions before removal directions (s 27(3)). Issue annual FCS statements detailing payments and tax withheld (s 62ZZKA(2)). Obtain Court leave or consent before proceedings or enforcement during management. Notify APRA of proposed external administrator appointments at least one week in advance (s 62ZQ). Publish Gazette notices for standards and use approved forms for FCS claims. Maintain records to support APRA determinations on fair value or transferred liabilities.