(Re)Insurance and Regulation Focus - fortnight commencing 31 March
01 April 2025
Key developments over the last fortnight
Treasury release next tranche of Delivering Better Financial Outcomes Legislation
Treasury has released a draft of the first part of the second tranche of the Delivering Better Financial Outcomes Legislation for consultation. This follows the passing of the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 (Cth) in July 2024 and the release of a key fact sheet for the second part of the second tranche of legislation in December 2024. The current consultation draft of the legislation proposes to replace Statements of Advice with a Client Advice Record, clarify advice topics that can be collectively charged for via superannuation, and allow super funds to provide prompts to members to drive engagement at key life stages. The timing is unclear for the second part of the second tranche which, based on the fact sheet, we expect will include the introduction of a new class of financial adviser and provide targeted reforms to modernise financial advice. However, Treasury has stated that the second part of the second tranche of legislation is being worked on and will be consulted on, and that they plan to combine both parts of the second tranche and introduced a single legislative package to Parliament.
Improving access to affordable and quality financial advice | Treasury.gov.au
Insurance Council left disappointed by Federal Budget
The Insurance Council of Australia (ICA) has criticised the Federal Budget for not following recommendations for a $30 billion investment in a flood defence fund. The Federal Budget contained no allocation for new money for increased disaster resilience. An ICA spokesperson stated that the ICA was “disappointed that it [the Federal Budget] contained no new money for long-term investment in making Australia more resilient to extreme weather, in particular our most costly disaster – flood” and believed that the government was sacrificing long term thinking and investment for immediate relief on cost of living pressures. This follows announcements that the impacts from Tropical Cyclone Alfred have resulted in insurance claims surpassing 75,000. The ICA says insured costs from extreme weather events have reached a record $22.5 billion over the past five years and have called for a dedicated flood defence fund to reduce risks which it views will ultimately lead to a lower premiums for customers.
ICA ‘disappointed’ by federal budget - Insurance News - insuranceNEWS.com.au
ASIC and RBA take action against the ASX for operational risk failings
Following a CHESS batch settlement failure in December last year, both the RBA and ASIC have taken action against the ASX to address concerns over the management of operational risks. The RBA has required that ASX Clear Pty Ltd and ASX Settlement Pty Ltd be reassessed for compliance with the RBA’s Financial Accountability Standards by downgrading their assessment of the entities’ compliance with the operational risk standard from ‘partly observed’ to ‘not observed’ while ASIC has directed the ASX to engage an expert to undertake a technical review under s 823BB of the Corporations Act. With CPS 230 on the horizon, insurers should pay close attention to the actions taken by ASIC and the RBA to address operational risk concerns as it is likely that these kinds of regulatory actions will only increase going forward.
25-050MR RBA and ASIC act on deep concerns with ASX | ASIC
APRA flags threat to insurance affordability
Jane Magill, APRA Executive Director for General Insurance and Banking, has used her speech at the Future of Insurance 2025 conference to warn that rising premiums, service provider risks and catastrophe losses are creating the perfect storm to test the insurance industry’s resilience. APRA urged insurers to act on findings from recent reviews and apply learnings from natural disasters to address these concerns. In doing so, insurers should fully understand their business models and supply chains to support relevant accountability structures. APRA have also stated that both FAR and CPS 230 (the latter to come into effect from July this year) will address the growing risks and resilience issues by driving accountability measures and ensuring the capacity to continue to operate during major disruptions. APRA has also again called on insurers to focus on rebuilding consumer trust with greater transparency around policy coverage and pricing.
Key dates on the horizon
- 2 May 2025 – consultation on the first part of the second tranche of DBFO legislation closes.
- 20 May 2025 – the Sparkes team are presenting at AILIA on CPS 230 and its impact on Delegated Authorities
- *1 July 2025 – APRA prudential Standard CPS 230 commences.*
In case you missed it
Our very own Matt Ellis headlined the AILA General Insurance Law Review for 2025 presenting in both NSW and VIC on recent development in insurance case law and regulatory reforms.
