8AWhen cyclone risks must be reinsured with the Corporation

8A When cyclone risks must be reinsured with the Corporation

(1) If a general insurer carries on insurance business that includes undertaking liability, under pool insurance contracts, in respect of eligible cyclone losses, the insurer must maintain contracts of reinsurance with the Corporation that: (a) cover the insurer’s liability, under all pool insurance contracts that it enters into, in respect of all eligible cyclone losses; and (b) insure against 100% of the insurer’s liability, under each of those pool insurance contracts, in respect of all eligible cyclone losses.

Note: A pecuniary penalty may be imposed for a contravention of this subsection: see section 127F of the Insurance Act 1973.

(2) Subsection (1) has effect subject to a direction that is in force under section 38 and provides for the extent to which risk is to be retained by reinsureds under the relevant contracts of reinsurance. (3) Subsection (1) has effect even if the general insurer has entered into a contract of reinsurance otherwise than with the Corporation. (4) The Corporation may enter into contracts of reinsurance that insure against the reinsureds’ liability, under pool insurance contracts, in respect of eligible cyclone losses arising on and after 1 July 2022. Exception where premium income is below prescribed threshold in previous financial year (5) Subsection (1) does not apply to a general insurer during a calendar year if the amount worked out under subsection (6) does not exceed the threshold amount prescribed by the regulations. (6) For the purposes of subsection (5), the amount is the total gross written premiums that the reporting standard prescribed by the regulations for the purposes of this subsection would require the general insurer to report to APRA: (a) in respect of the last financial year of the general insurer that ended before the start of the calendar year referred to in subsection (5); and (b) for a class of direct business consisting of contracts of insurance: (i) that the general insurer enters into as insurer; and (ii) that are wholly or partly pool insurance contracts; and (iii) under which the insurer undertakes any liability in respect of eligible cyclone losses (whether or not the contracts cover other risks) other than eligible cyclone losses arising at a place covered by a determination in force under subsection (7); if such contracts were a distinct class of direct insurance business. (7) The Corporation may, by notifiable instrument, determine areas where, in its opinion, the risk of eligible cyclone losses arising is so small as to be negligible. One in, all in rule for exempt general insurer (8) However, if a general insurer enters into a contract of reinsurance with the Corporation that insures against the insurer’s liability under a pool insurance contract in respect of eligible cyclone losses, subsection (5) does not apply to the general insurer while that contract of reinsurance is in force. How this section applies to a Lloyd’s syndicate (9) If a syndicate of Lloyd’s underwriters enter into a contract of reinsurance with the Corporation that insures against their liability under a pool insurance contract in respect of eligible cyclone losses, then, while that contract of reinsurance is in force, subsections (1), (2) and (3) apply to: (a) the syndicate; and (b) each Lloyd’s underwriter who is a member of the syndicate, when acting in that capacity; in the same way as those subsections apply to a general insurer. How this section applies to an unauthorised foreign insurer (10) If an unauthorised foreign insurer enters into a contract of reinsurance with the Corporation that insures against the liability of the foreign insurer under a pool insurance contract in respect of eligible cyclone losses, then, while that contract of reinsurance is in force, subsections (1), (2) and (3) apply to that foreign insurer in the same way as those subsections apply to a general insurer.