Division 14.1Transitional arrangements arising out of the Financial System Legislation Amendment (Resilience and Collateral Protection) Regulation 2016

## Part 1—Preliminary #### 1 Name of regulations These regulations are the Life Insurance Regulations 1995. #### 1.03 Definitions In these regulations: > Act means the Life Insurance Act 1995. > CPI means the Consumer Price Index number (being the weighted average of the 8 capital cities) published by the Australian Bureau of Statistics. > Friendly Societies Code has the meaning given by item 1 of Schedule 8 to the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999. > transfer date has the meaning given by section 2 of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999. > World Trade Organization Agreement means the Marrakesh Agreement establishing the World Trade Organization, done at Marrakesh on 15 April 1994. > Note: The Agreement is in Australian Treaty Series 1995 No. 8 (\[1995\] ATS 8) and could in 2015 be viewed in the Australian Treaties Library on the AustLII website (http://www.austlii.edu.au). ## Part 2—Explanation of key concepts #### 2.01 Contract to pay annuity—term prescribed For the purposes of paragraph 9(1)(d) of the Act, the term of 10 years is prescribed as the term that the term of an annuity paid under a contract must exceed for the contract to constitute a life policy. ## Part 2A—Special provisions relating to life companies that are friendly societies #### 2A.01 Modifications of the Act in its application to friendly societies The Act is modified in its application to friendly societies as set out in Schedule 5. > Note: The Act applies to friendly societies subject to the provisions of Part 2A of the Act. See also section 16ZC of the Act. ## Part 2B—Special provisions relating to Australian branches of foreign life insurance companies #### 2B.01 Eligible foreign life insurance company (1) For paragraph 16ZD(1)(e) of the Act, the conditions are any of the following: (a) the body corporate: (i) is authorised to carry on life insurance business in the United States of America; and (ii) is incorporated in the United States of America; (b) the body corporate: (i) is authorised to carry on life insurance business in New Zealand; and (ii) is incorporated in New Zealand; (c) the body corporate: (i) is authorised to carry on life insurance business in Japan; and (ii) is incorporated in Japan; (d) the body corporate: (i) is authorised to carry on life insurance business in Korea; and (ii) is incorporated in Korea; (e) the body corporate: (i) is authorised to carry on life insurance business in China; and (ii) is incorporated in China. (2) In paragraph (1)(e), a reference to China does not include a reference to the following members of the World Trade Organization established by the World Trade Organization Agreement: (a) Hong Kong, China; (b) Macao, China; (c) Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu. ## Part 4—Statutory funds of life companies #### 4.00 Notice of establishment of statutory fund (1) A notice under paragraph 33(1)(d) of the Act of the establishment of a statutory fund must contain particulars of: (a) the classes of life insurance business to be carried on by the company within the fund; and (b) the categories of life insurance business to be carried on by the company within each of those classes; and (c) the kinds of policies to be written by the company within those categories; and (d) proposed financing arrangements for the writing of new life insurance business to which the fund relates; and (e) projections of the life insurance business to which the fund relates for whichever is greater of the following periods: (i) the period of the financing arrangements for that business; or (ii) 10 years; and (f) a statement of the accuracy of the particulars referred to in paragraph (e) by the appointed actuary of the company. (2) For the purposes of subsection 33(2) of the Act, the notice must be given in writing within 14 days after establishment of the fund. (3) This regulation does not apply to a life company that is a friendly society. #### 4.00A Charges over the assets of statutory funds: derivative contracts (Act, s 38(3)(c)) (1) A life company may give a charge over, or in relation to, an asset of a statutory fund if: (a) the charge is given in relation to a derivative to which either of the following is a party: (i) the life company; (ii) another person (the agent) acting on behalf of, on the instructions of, on account of or for the benefit of the life company; and (b) the charge complies with subregulation (1A), (1B) or (1C); and (c) the life company has in place a risk management statement that sets out: (i) policies for the use of derivatives that include an analysis of the risks associated with the use of derivatives within the investment strategy of the company; and (ii) controls on the use of derivatives that take into consideration the expertise of staff; and (iii) compliance processes to ensure that the controls are effective (for example, reporting procedures, internal and external audits and staff management procedures); and (d) the investment to which the charge relates is made in accordance with the risk management statement. (1A) A charge complies with this subregulation if it is given in order to comply with a requirement, in either of the following, that the performance of obligations in relation to the derivative be secured: (a) rules governing the operation of an approved body (as defined in subregulation (2)); (b) a law of the Commonwealth, a State, a Territory or a foreign country (including a part of a foreign country) that applies to dealings in the derivative. (1B) A charge complies with this subregulation if: (a) it is given in favour of the agent; and (b) the agent enters into an arrangement that is a derivative on behalf of, on the instructions of, on account of or for the benefit of the life company; and (c) the agent is obliged under either of the following to keep the property of the life company separate from the property of the agent: (i) rules governing the operation of an approved body (as defined in subregulation (2)); (ii) a law of the Commonwealth, a State, a Territory or a foreign country (including a part of a foreign country) that applies to dealings in the derivative; and (d) the agent is under an obligation, or but for a netting‑off would be under an obligation, to transfer property to another entity in relation to the derivative; and (e) the charge is given over an asset or assets of the statutory fund, to secure the performance of an obligation or obligations in relation to the derivative. (1C) A charge complies with this subregulation if: (a) the asset over which the charge is given is financial property; and (b) the obligations secured by the financial property are any of the following: (i) an obligation of the life company that relates to the derivative; (ii) an obligation of the life company to pay interest on an obligation covered by subparagraph (i); (iii) an obligation of the life company to pay costs and expenses incurred in connection with enforcing a charge given in respect of an obligation covered by subparagraph (i) or (ii); and (c) the financial property is transferred or otherwise dealt with so as to be in the possession or under the control of: (i) the secured person; or (ii) another person (who is not the life company), on behalf of the secured person, under the terms of an arrangement evidenced in writing. (1D) For the purposes of paragraph (1C)(c), financial property is taken not to be in the possession or control of a person mentioned in that paragraph if, under the charge, the life company is free to deal with the financial property in the ordinary course of business until the person’s interest in the financial property becomes fixed and enforceable. (1E) Without limiting paragraph (1C)(c), financial property is taken to be in the possession of a person for the purposes of that paragraph if: (a) in a case where there is an issuer of the financial property—the person is registered by, or on behalf of, the issuer as the registered owner of the financial property; or (b) in a case where the financial property is intermediated financial property—the person is the person in whose name the intermediary maintains the account. (1F) Without limiting paragraph (1C)(c), financial property is taken to be under the control of a person for the purposes of that paragraph if: (a) the financial property is intermediated financial property; and (b) the intermediary is not the life company (but may be the secured person or any other person); and (c) there is an agreement in force between the intermediary and one or more other persons, one of which is the secured person or the life company; and (d) the agreement has one or more of the following effects: (i) the person in whose name the intermediary maintains the account is not able to transfer or otherwise deal with the financial property; (ii) the intermediary must not comply with instructions given by the life company in relation to the financial property without seeking the consent of the secured person (or a person who has agreed to act on the instructions of the secured person); (iii) the intermediary must comply, or must comply in one or more specified circumstances, with instructions (including instructions to debit the account) given by the secured person in relation to the intermediated financial property without seeking the consent of the life company (or any person who has agreed to act on the instructions of the life company). (1G) Without limiting paragraph (1C)(c), the fact that the life company retains a right of one or more of the following kinds does not of itself stop that paragraph from being satisfied: (a) right to receive and withdraw income in relation to the financial property; (b) right to receive notices in relation to the financial property; (c) right to vote in relation to the financial property; (d) right to substitute other financial property that the parties agree is of equivalent value for the financial property; (e) right to withdraw excess financial property; (f) right to determine value of financial property. (2) In this regulation: > approved body means a body mentioned in Schedule 7. > derivative means any of the following: (a) a derivative (within the meaning of Chapter 7 of the Corporations Act 2001); (b) a foreign exchange contract (within the meaning of that Act); (c) an arrangement that is a forward, swap or option, or any combination of those things, in relation to one or more commodities; but does not include any arrangement that is of a kind mentioned in subregulation 6(2) of the Payment Systems and Netting Regulations 2001. > Note: Subregulation 6(2) of the Payment Systems and Netting Regulations 2001 identifies obligations that are not eligible obligations in relation to a close‑out netting contract. The arrangements mentioned include credit facilities, reciprocal purchase agreements (otherwise known as repurchase agreements), sell‑buyback arrangements, securities loan arrangements, contracts of insurance and managed investment schemes. > financial property has the same meaning as in the Payment Systems and Netting Act 1998. > intermediary has the same meaning as in paragraph (h) of the definition of financial property in section 5 of the Payment Systems and Netting Act 1998. > intermediated financial property has the same meaning as in the Payment Systems and Netting Act 1998. #### 4.00B Charges over the assets of approved benefit funds (Act s 38(3)(c)) (1) This regulation applies to a friendly society whose approved benefit fund rules provide that the society may apply the assets of an approved benefit fund, or mortgage or charge those assets. (2) The friendly society may apply the assets of an approved benefit fund, or mortgage or charge those assets, if the application, mortgage or charge is made for the advantage of the approved benefit fund, in accordance with the approved benefit fund rules. (3) Subregulation (2) does not apply to a charge over, or in relation to, an asset of an approved benefit fund that satisfies the requirements of subregulation 4.00A(1). #### 4.01A Prohibited investments For the purposes of paragraph 43(3)(d) of the Act, an investment of assets of a statutory fund of a life company in a subsidiary of that life company is prohibited if: (a) the assets of the company that are invested in that subsidiary exceed twice the sum of: (i) if the company is not an eligible foreign life insurance company: (A) the assets of the statutory fund that are invested in the subsidiary; and (B) the assets of any other statutory funds of the company that are invested in the subsidiary; or (ii) if the company is an eligible foreign life insurance company: (A) the assets of the statutory fund that are invested in the subsidiary; and (B) the assets of any other fund, approved by APRA, invested in the subsidiary; or (b) the assets of the statutory fund that are invested in that subsidiary are re‑invested, whether directly or indirectly, through 1 or more interposed bodies corporate, trusts or partnerships, with a company that is related to the company (other than as a subsidiary). ## Part 9—Transfers and amalgamations of life insurance business #### 9.01 Copy of scheme for transfer etc. to be given to APRA For the purposes of paragraph 191(2)(a) of the Act, a copy of: (a) the scheme; and (b) each actuarial report on which the scheme is based; must be given to APRA before a notice of intention to apply to the Court for confirmation of the scheme is published in accordance with subsection 191(2A) of the Act. #### 9.02 Notice of intention to apply for confirmation of scheme (2) For the purposes of paragraph 191(2A)(c) of the Act, a notice of intention to make an application for confirmation of a scheme must: (a) state that an affected policy owner may get a copy of the scheme from the place, within the times, and for the period, set out in subregulation (4); and (b) give the address of each place at which a copy of the scheme may be obtained. (3) The notice must be published by the applicant under paragraph 191(2A)(b) of the Act before the scheme is released for public inspection under subregulation (4). (4) A copy of the scheme must be open for public inspection from 9.00 a.m. until 5.00 p.m. every day (except weekends and public holidays), for a period of at least 15 days, at: (a) an office of the applicant; or (b) another location approved, in writing, by APRA; in each State and Territory in which there is a register of life policies that includes the relevant policy of an affected policy owner: > Note 1: A life company must have a register of life policies for each State and Territory in which it carries on life insurance business: subsection 226 (1) of the Act. > Note 2: An affected policy owner is the owner of a policy that is referable to a statutory fund affected by a scheme: subsection 191 (1) of the Act. #### 9.03 Application for confirmation of scheme (1) For the purposes of subsection 193(2) of the Act, an application to the Court for confirmation of a scheme may be made no earlier than whichever is the later of: (a) the day after the day on which the period referred to in subregulation 9.02(4) ends; or (b) unless the Court dispenses with the need for compliance with paragraph 191(2)(c) of the Act—15 days after the approved summary of the scheme has been given to every affected policy owner under that paragraph. > Note: The Court may dispense with the need to comply with paragraph 191(2)(c) of the Act in relation to a particular scheme if it is satisfied that, because of the nature of the scheme or the circumstances attending its preparation, it is not necessary that the paragraph be complied with: subsection 191(5) of the Act. #### 9.04 Documents to be lodged with APRA (1) For the purposes of subsection 197(1) of the Act, a company to which life insurance business is transferred, or with whose life insurance business any part of the business of another company is amalgamated must give APRA the following documents: (a) a statement of the nature and terms of the transfer or amalgamation; (b) a certified copy of each of the following documents: (i) the scheme providing for the transfer or amalgamation; (ii) an actuarial report, or other report, on which the scheme, and the agreement or deed, are founded; (iii) the agreement or deed under which the transfer or amalgamation is effected; (iv) the Court order confirming the scheme; (v) a statement of the assets and liabilities of each company associated with the transfer or amalgamation; (c) a statutory declaration by the principal executive officer: (i) setting out, in relation to the transfer or amalgamation: (A) each payment made; and (B) a reasonable estimate of each payment to be made; and (ii) stating that he or she reasonably believes that no other payment has been made, or will be made, by, or with the knowledge of, a party to the transfer or amalgamation. (2) For the purposes of subsection 197(2) of the Act, and subject to subregulation (3), the documents must be lodged within 30 days after the transfer or amalgamation is completed. (3) A company may apply, in writing, to APRA, before the end of the period referred in subregulation (2), for an extension of the time in which to lodge the documents. (4) If APRA believes that the company cannot reasonably provide the documents within the period referred to in subregulation (2), APRA must, within 14 days of receiving an application: (a) give an extension, of no longer than 30 days, to the company, to provide the documents; and (b) so inform the company in writing. ## Part 10—Provisions relating to policies #### 10.01 Assignment of life policy—prescribed form For the purposes of paragraph 200(2)(a) of the Act, Form 2 in Schedule 4 is prescribed as the form of memorandum of transfer for the purpose of assigning rights under a life policy (other than a policy that is issued by a friendly society). #### 10.02 Notice of change of trustee of life policy For the purposes of subsection 203(2) of the Act, a notice that a person is the trustee of a life policy must be in the form of a statutory declaration. #### 10.04 Division 4 of Part 10 of the Act to apply to certain life policies with modifications (Act, s 206(3)) Division 4 of Part 10 of the Act (relating to surrender values, paid‑up policies and non‑forfeiture of policies) applies to a class of life policies specified in an item in Schedule 2 subject to the modifications specified in that item. #### 10.05 Interest on overdue premiums—prescribed terms For the purposes of subsection 210(3) of the Act, the least favourable terms on which interest may be charged on overdue premiums is the interest rate worked out by the following formula:  where: > XYB is the mean, rounded to the lower 0.25%, of the 10 year Treasury Bond yields (as shown in figures supplied by the Reserve Bank of Australia) at the end of each of the 6 successive half financial years ended before the date of calculation. #### 10.05A Unclaimed money—statements (1) For the purposes of this regulation: (a) a statement that contains 50 or more items must be recorded on computer disk; and (b) a statement that contains less than 50 items must be recorded either in writing or on computer disk. (2) A statement under subsection 216(1) of the Act of unclaimed money as at the end of a calendar year: (a) if it is in writing—must be in accordance with Form 3 in Schedule 4; or (b) if it is recorded on computer disk—must contain particulars of the number and total value of unclaimed policies and particulars, for each policy for which money is unclaimed, of: (i) the policy number; and (ii) the full name of the life or lives insured; and (iii) the last known address of the life or lives insured; and (iv) the full name of the policy owner; and (v) the last known address of the policy owner; and (vi) the amount due to the policy owner; and (vii) the date the amount became due; and (viii) the State or Territory for which the policy is registered. (3) A statement under subsection 216(4) of the Act of money paid between the end of the calendar year and the date on which the statement is given to ASIC: (a) if it is in writing—must be in accordance with Form 4 in Schedule 4; or (b) if it is recorded on computer disk—must contain particulars of the number and total value of policies claimed and particulars, for each policy for which money has been paid, of: (i) the policy number; and (ii) the full name of the claimant; and (iii) the date of the claim; and (iv) the date the claim was paid; and (v) the amount paid. (4) A statement recorded on computer disk must be accompanied by a lodgment form in accordance with Form 5 in Schedule 4. (5) A life company must notify ASIC in writing if there is no unclaimed money. #### 10.05AA Unclaimed money—interest payable (1) This regulation sets out how to work out the interest for paragraph 216(7A)(a) of the Act. (2) If the unclaimed money is paid to the Commonwealth in more than one payment, the interest is to be worked out separately for each payment. (3) The interest is to be worked out for the period (the interest period) that: (a) starts on the later of: (i) 1 July 2013; and (ii) the day when the unclaimed money was paid to the Commonwealth; and (b) ends on the 14th day after the Treasurer last authorised the unclaimed money to be paid under subsection 216(7) of the Act. (4) The interest is to be worked out by adding together the interest for each financial year during the interest period. (5) The interest for each financial year is worked out using the following formula, and rounding the result to the nearest cent:  where: > amount means the amount of unclaimed money plus the interest (if any) worked out for each earlier financial year for which interest is payable. > days interest payable means the number of days in the financial year for which interest is payable. > days in the financial year means the number of days in the financial year. > interest rate, for a financial year, means: (a) the percentage change in the All Groups CPI between the 2 March quarters most recently published before the first day of the financial year (rounded up to 4 decimal places); or (b) if that percentage change is less than 0%—0%. #### 10.05B Public notice of unclaimed moneys ASIC may publish, in any form, information contained in a statement given to ASIC for the purposes of section 216 of the Act, by including any or all of the particulars given in the statement in relation to the unclaimed moneys. #### 10.06 Calculation of net claim value of policy (1) For the purposes of subsection 223(2) of the Act, the net claim value of a policy: (a) that has matured; or (b) under which the life insured has died; is the amount payable in respect of the claim on the happening of the contingency, less the amount of any debt owed to the relevant life company under, or secured by, the policy, at that time. (2) For the purposes of that subsection, the net claim value of a policy, other than a policy described in subregulation (1), at a particular time, is the amount payable in respect of the claim as if the policy had voluntarily been terminated at that time, less the amount of any debt owed to the relevant life company under, or secured by, the policy, at that time. ## Part 11—Miscellaneous #### 11.01 Fee for inspection or copying of documents (1) For the purposes of subsection 243(2) of the Act, a fee of $10 is prescribed as the fee to inspect a financial statement or an annual statistical return given to APRA under subsection 118(2) of the Act. (2) Subject to subregulation (3), for the purposes of that subsection, a fee of $1 a page is prescribed as the fee for copying the whole, or part of, a document referred to in subregulation (1). (3) In relation to a particular request to copy documents of a company in respect of a financial year, if the fee payable under subregulation (2) would exceed $60, the maximum fee payable for that copying is $60. ## Part 13—Dictionary #### 13.02 Definition of superannuation policy—dictionary For the purposes of paragraph (b) of the definition of superannuation policy in the Schedule to the Act, a life policy included in any of the following kinds of policies is declared to be a superannuation policy for the purposes of the Act: (a) a policy of any of the following kinds that is maintained for the purposes of superannuation or retirement: (i) an immediate annuity policy; (ii) a deferred annuity policy; (iii) an allocated annuity policy; (b) a policy that is owned by the trustee of a scheme, being a scheme that is: (i) an approved deposit fund; or (ii) a pooled superannuation trust; (c) an RSA (within the meaning of the Retirement Savings Accounts Act 1997). ## Part 14—Transitional arrangements ### Division 14.1—Transitional arrangements arising out of the Financial System Legislation Amendment (Resilience and Collateral Protection) Regulation 2016 #### 14.01 Arrangements The amendments of these Regulations made by items 1 to 5 of Schedule 1 to the Financial System Legislation Amendment (Resilience and Collateral Protection) Regulation 2016 apply to charges given on and after the commencement of this regulation.