Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Hansard source

I start by thanking all of those members who have taken part in this very important debate on the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 and the Corporations (National Guarantee Fund Levies) Amendment Bill 2007. With regard to the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007, both the 2003 report of the HIH royal commissioner and the International Monetary Fund’s 2006 Financial Sector Assessment Program identified a potential regulatory gap with regard to direct offshore foreign insurers. This bill addresses this identified gap and it will ensure that consumers and businesses that purchase a general insurance product in Australia can be confident that they will be protected by Australia’s world-class prudential regime. It also provides for the equitable prudential treatment of locally incorporated and offshore foreign insurers who carry on insurance business in Australia. This bill will encourage competition and innovation in the Australian general insurance market and further enhance Australia’s overseas reputation as a sound and well-regulated market.

The bill also facilitates a reduction in the regulatory and compliance costs for insurers carrying on business in Australia by providing for the Australian Prudential Regulation Authority to adopt a more risk focused approach to prudential regulation. Under the refinements to the general insurance prudential framework, prudential standards will be aligned with the risk posed by different classes of insurers, with the result that categories of insurers posing a lower risk will face reduced regulatory costs. This is good news for our domestic insurers and those organisations looking to establish a presence in Australia. To address concerns that there may be some insurance risks that cannot be appropriately placed with an authorised insurer, the bill allows exemptions for these risks. Following further consultation with interested stakeholders, the exemptions will be developed through the insurance regulations.

With respect to discretionary mutual funds, DMFs, the bill will allow Australians to continue to have access to this form of risk management product if they wish. The bill also extends disclosure requirements to enable consumers to make informed decisions about whether such a product best suits their needs. At the same time, the government will gather information on the role of DMFs in the risk management market and review whether or not to prudentially regulate these entities within three years.

I will now move to the Corporations (National Guarantee Fund Levies) Amendment Bill 2007. This bill makes minor changes to the levying arrangements for the benefit of the National Guarantee Fund while reducing red tape and compliance costs for banks. This change is also supported by a minor amendment to the Corporations Act 2001 which is included in the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007. The National Guarantee Fund is the compensation scheme for investors on the ASX. The measures in both bills address uncapped levying abilities for the benefit of the National Guarantee Fund and will set in place a cap on the amount of levies payable by market participants per financial year. The changes remove the potential unlimited liability of participants to refill the fund. The unlimited liability currently prevents banks from participating directly on the ASX market. Instead, banks must incorporate subsidiaries to participate on the market. This approach will facilitate banks participating directly without the cost currently involved. Investors will not be affected by the changes.

In conclusion, this measure clearly furthers the government’s commitment to reducing red tape burden and compliance costs. I thank those individuals and organisations that provided input to the development of both of these bills and I commend these bills to the House.

Question agreed to.

Bills read a second time.

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