Australia's current financial services regulatory & compliance landscape is changing rapidly - Clyde & Co's weekly Regulatory Roundup will ensure you are up to date with the most important changes. In each edition, we will set out key developments from the past week for you to consider. 

Subscribe here: ONLINE LINK

1. APRA Consults on Adjustments to General Insurance Reinsurance Framework: The Australian Prudential Regulation Authority (APRA) is consulting on proposed refinements to its general insurance reinsurance framework. In response to evolving reinsurance market dynamics and industry feedback, APRA aims to improve access to diverse reinsurance options while easing the regulatory burden on insurers. As part of this consultation, APRA seeks industry feedback on modifications to reinsurance settings and eligibility criteria. Ultimately, these adjustments are intended to enhance access to varied reinsurance solutions, streamline regulatory requirements, and align with international standards.

2. APRA Enforces $10 Million Capital Requirement on Pacific International Insurance: APRA has imposed an additional $10 million capital requirement on Pacific International Insurance Pty Limited (Pacific) following a comprehensive review of its binder holder arrangements. These arrangements permit intermediaries to issue policies on behalf of the insurer, a practice intended to assist with difficult-to-place risks or reduce costs. However, APRA’s review highlighted critical deficiencies in Pacific’s oversight, accountability, and resourcing of its binder holder business. APRA Member Suzanne Smith emphasized that while outsourcing can benefit insurers, the ultimate responsibility for managing insurance risks remains with the insurer.

3. ASIC’s Latest Insights from the Reportable Situations Regime: ASIC has published the third report on insights from the reportable situations regime, summarizing trends from 1 July 2023 to 30 June 2024. Covering aspects like breach identification, investigation processes, root causes, consumer impacts, and remediation, the report reveals that licensees submitted 12,298 reports, with 79% impacting customers financially or otherwise. During the period, around $92.1 million in compensation was paid to approximately 494,000 customers for breaches, highlighting the regime’s role in promoting accountability and consumer protection.

4. ASIC seeks feedback on proposed guidance on sustainability reporting regime: From 1 January 2025, many large Australian businesses and financial institutions will need to prepare annual statutory sustainability reports containing climate-related financial disclosures. ASIC has released a draft regulatory guide on the sustainability reporting regime for consultation with stakeholders, with Regulatory Guide 000 Sustainability reporting (Draft RG 000) including guidance on who must prepare a sustainability report, how the regime will interact with existing legal obligations and how ASIC will administer the sustainability reporting requirements. This includes specific guidance on ASIC’s approach to granting relief from the regime and use of its new directions power. 

International perspective: The Financial Action Task Force (FATF), the global group that sets international anti-money laundering and counter-terrorism financing (AML/CTF) standards, has published two recent updates relating to international ML/TF risk. The reports provide an update on jurisdictions which may pose a risk to the international financial system, with North Korea, Iran and Myanmar remaining on the high-risk jurisdiction “black list”. The update also outlined jurisdictions that are under increased monitoring due to strategic deficiencies in their AML/CTF regimes, but that are actively working with the FATF to address these deficiencies. Reporting entities should be aware of countries that pose a higher risk of money laundering or terrorism financing and use this information to help guide ML/TF risk assessments, compliance programs and decisions about submitting suspicious matter reports to AUSTRAC.