Govt activates insurance compensation scheme
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The Federal Government has approved the activation of the scheme used to accommodate policyholders when an insurance company fails — the Financial Claims Scheme Policyholder Compensation Facility — in relation to a small general insurer, Australian Family Assurance Limited.
Activation of the scheme was announced by the Minister for Financial Services, Chris Bowen, who made clear that the collapse of Australian Family Assurance predated the global financial crisis.
He described the insurance company as a small insurer that had been in run-off since 2002, having written no new business since that time, and which currently had 18 policyholders with known outstanding claims.
Bowen said the decision to activate the scheme would ensure that vulnerable claimants would be able to have their claims managed and paid promptly rather than waiting until the insurance company had been liquidated.
“The Government, through the Australian Prudential Regulation Authority (APRA), will fund payments under the facility, with the costs to be recovered as far as possible through the liquidation of Australian Family Assurance,” he said.
The minister said his decision to activate the scheme had followed advice from APRA and the appointment of a judicial administrator to the company.
He said APRA had advised him that it believed the company was insolvent.
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