Concerns as more power goes to regulators
Two major life insurers have expressed concerns over proposed Federal Government legislation that gives extensive additional powers to the Australian Prudential Regulation Authority (APRA) to regulate the sector, including the power to block all dividend payments.
ING and AXA claim some of the powers conferred on APRA by the Financial Sector Legislation Amendment (Enhancing Supervision and Enforcement) Bill are “unwarranted and excessive”.
There is also concern the Bill could act as a disincentive to using Australia as a base for regional activities, contrary to the Government’s stated aim of making
the country a regional centre for financial services.
Their reservations were outlined in submissions to the Senate Standing Committee on Economics, which issued a report on its inquiry into the proposed legislation on May 7.
The Federal Government said it proposed the Bill to make Australian law consistent with international law regarding the non-operating holding companies (NOHCs) of life insurance companies.
The life companies have effectively claimed there is no need to replicate the powers that APRA currently has to regulate the NOHCs of banks and general insurers.
This is because the life companies are required by the Life Insurance Act to give priority to the interests of current and prospective policy owners over the interests of shareholders.
They say the Bill unnecessarily gives APRA the power to prevent (listed) life companies from moving capital to overseas companies from a holding company, as well as borrowing money or paying any shareholder dividends.
ING Australia’s senior manager of government and regulatory affairs, Allan Hansell, told Money Management that ING was “keen to ensure there isn’t a doubling of regulation”.
“We don’t want to see a position where there is regulation over and above what is necessary.”
He said ING was also calling for a regulatory impact assessment so the full cost of implementing the legislation could be “teased out in greater detail”.
“There are always operational costs from regulatory change and these are things companies have to factor into their workings.”
ING’s other major concern was to ensure “appropriate recognition by the Government and APRA that to become compliant would take some time and there would need to be some transitional measures included”.
AXA Asia Pacific group chief financial officer Geoff Roberts said some measures are “not required to achieve stated policy objectives, and will create unwarranted and excessive regulatory burdens on NOHCs and their subsidiaries”.
Recommended for you
ASIC has cancelled the AFSL of a Perth financial services firm following payments to its clients by the Compensation Scheme of Last Resort after a failed managed investment scheme.
Bravura chief executive Andrew Russell has announced he will be stepping down from the company, just under two years after his appointment.
Financial advice businesses with a younger, wealthier client base are enjoying higher valuations and increased attention from potential buyers than those with older clients.
A financial advice firm has been penalised $11 million in the Federal Court for providing ‘cookie cutter advice’ to its clients and breaching conflicted remuneration rules.
