Government outlines DOFI exemptions
Exemptions for Australian businesses that want to use direct offshore foreign insurers (DOFIs) as part of their risk management have been announced today by the Federal Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen.
The Financial Sector Legislation Amendment (Discretionary Mutual Find and Direct Offshore Foreign Insurers) Act 2007, which commences on the first day of July this year, requires DOFIs to be authorised insurers subject to Australia’s prudential regime.
The exemptions to the Act allow for Australia’s largest businesses and global companies headquartered in Australia, as well as those companies that are seeking insurance for typical risks or highly customised risk products, to buy insurance from unauthorised DOFIs.
Large businesses eligible for the exemption will include corporations, partnerships and trusts that have: total group gross operating revenue in Australia of $200 million or more; total group gross assets in Australia of $200 million or more; or total group employees in Australia of 500 or more.
Atypical risks may include, among other things, insurance for war, terrorism, satellites or space, and medical or clinical trials.
“The exemption balances the need for protection for Australian businesses and consumers with the acknowledged need that some insurance will not be able to be placed in Australia,” Bowen said.
“There will be scope to further limit the exemption as Australia’s innovative and competitive domestic insurance market responds to more of the insurance needs that currently have to flow offshore because they cannot currently be written in Australia,” he said.
Under the exemption, the Australian Securities and InvestmentsCommission will collect data from Australian Financial Services Licence-holding intermediaries about the insurance business that is placed with the DOFIs.
This will allow ongoing monitoring of the business flowing offshore and will enable the exemption arrangements to be reviewed, Bowen’s announcement said.
The announcement also noted that it is not expected that retail insurance will ordinarily flow offshore under the exemption.
Details of the exemption will be available in late April on the Federal Treasury website.
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