However. the TIO operates as apparently the only insurer in Australia not under the umbrella of Federal APRA regulation (Australian Prudential Regulation Authority). How can that be?
The Insurance Council and the parliamentary committee seem to have been unaware of this during the Cairns hearings.
CHAIR: Does APRA manage the Northern Territory entities' funds? Do you know, Mr Whelan?TIO state that is is their intent to comply with APRA prudential requirements, however they currently have specific exemption under NT provisions for the motor accident compensation fund (MAC).The position here has improved but has been as low as 35% of APRA capital requirements in recent years. The remainder of the TIO insurance book appears to be currently in line with that of the APRA regulated insurers.
Mr Whelan: APRA manages licensed insurers. I am assuming that they do, but I could not be absolutely sure.
There is also an interesting incident where the chairman of committee Graham Perrett (Moreton) quiped that Wayne Swan would be surprised by a suggeston that the Commonwealth may in fact have a guarantee on NT catastrophe risk?! I'm no constitutional lawer but that may be an interesting question given that the NT exists as an act of the Commonwealth, and the TIO state that they are guaranteed by the NT Guvmint.
APRA have been an effective regulator in recent years and their most recent Insight provides some interesting information on the impact of recent catastrophe events on reinsurance, and consequently the position of our insurers. There are key aspects of the TIO position which are relevant and to a regional centre such as Cairns (which will be discussed later) and it may be helpful and constructive if the current anomaly was removed and TIO brought within APRA.
The parliamentary inquiry has extended submissions deadline until 14th February. The submisson from Strata Community Australia provides a good analysis of the position with tropical strata insurance.