Life insurance (prudential standard) determination No. 3 of 2006 - Prudential Standard LPS 231 - Outsourcing
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Authority
- This Prudential Standard is made under section 230A of the Life Insurance Act 1995 (Life Insurance Act).
Application
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This Prudential Standard applies to all life companies authorised under the Life Insurance Act.
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Subject to the transition arrangements set out in this Prudential Standard, a life company must comply with this Prudential Standard from 1 April 2007 (referred to in this Prudential Standard as the effective date).
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This Prudential Standard only applies to outsourcing of a material business activity as defined in this Prudential Standard.
Interpretation
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By operation of section 13(1) of the Legislative Instruments Act 2003 terms not defined in this Prudential Standard but which are defined in the Life Insurance Act have the same meaning as in the Life Insurance Act.
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Outsourcing involves a life company entering into an agreement with another party (including a related body corporate) to perform, on a continuing basis, a business activity which currently is, or could be, undertaken by the life company itself.
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For the purposes of this Prudential Standard, a reference to a related body corporate of a life company is a reference to the meaning of “related body corporate” under section 50 of the Corporations Act 2001. A reference to a third party is a reference to an entity that is not the life company or a related body corporate of the life company. A reference to a service provider is a reference to the person providing the outsourced services to the life company.
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For the purposes of this Prudential Standard, offshoring means the outsourcing by a life company of a material business activity associated with its Australian business to a service provider (including a related body corporate) where the outsourced activity is to be conducted outside Australia. Offshoring includes arrangements where the service provider is incorporated in Australia, but the physical location of the outsourced activity is outside Australia. Offshoring does not include arrangements where the physical location of an outsourced activity is within Australia but the service provider is not incorporated in Australia.