Transpacific sinks, and it’s no great loss
A turbulent period in the life of Australia’s insurance industry was remembered last month with the appointment of a provisional liquidator to Transpacific Insurance Corporation.
Transpacific enjoyed a brief flurry of notoriety in 2003 – a time when the industry’s regulator started to worry about the number of overseas-domiciled insurers taking advantage of a capital crunch and a very tough local market. There were few, if any, restrictions on their entry, which miffed licensed insurers but made life easier for the small number of local brokers who used them.
In March 2003 the company found itself under the Australian Securities and Investments Commission’s (ASIC) blowtorch.
ASIC had been keeping a close eye on “unlicensed foreign insurers” entering the market, and the corporate watchdog “became aware” of a relationship between Transpacific and local underwriting agency Triton.
It turned out that the directors of the two companies were pretty much the same people, and one director also owned a local insurance broker, Aradlay, which was spruiking their products.
Just as interesting was the fact that Transpacific was licensed in the Cayman Islands, a Caribbean country which allowed insurers to register themselves – for a fee – as long as they didn’t actually conduct business there.
(That wasn’t unusual at the time. Even New Zealand allowed companies with very limited resources to register as insurers, but only if they conducted their business elsewhere, like Australia.)
Contrary to a report published recently in another online news publication, Transpacific was never registered as an insurer in Australia. It would probably never have been able to meet the strict criteria Australia set then and now for locally registered insurers.
In June 2004 ASIC obtained orders and declarations in the NSW Supreme Court that Transpacific and Triton had carried out a financial services business between August 2002 and March 2004 without a financial services licence.
The two companies agreed they had made false and misleading statements, including that they had a licence from the Cayman Islands Government to operate in Australia and that Transpacific had $40 million in paid-up capital.
They also agreed to cancel any policy on request and return the balance of the premium.
Transpacific Insurance was next heard of in 2007, when the Gibraltar Financial Services Commission issued a notice warning that a company of that name with an office in Gibraltar – but no authorisation to carry on insurance business there – had not renewed its licence with the Anjouan Offshore Finance Authority.
Anjouan is an island in the Comoros group, in the southern Indian Ocean. Not much happens there, although last year the island was invaded by a French-African Union force which ousted its military dictator.
Transpacific’s provisional liquidator, appointed by the NSW Supreme Court last month, is now examining the company’s books and its liabilities to decide if claimants and other creditors can be paid out. It’s not known at this stage how much debt the company is carrying.
The company will probably be wound up by the NSW Supreme Court on June 1, because it seems unlikely it will be able to trade its way out. With it will go an interesting story from a difficult period for the industry.
It was companies like Transpacific that finally convinced the Federal Government it had to do something about direct offshore foreign insurers, or DOFIs. Legislation now places tough restrictions on brokers wanting to access foreign insurers for local business.
So far the absence from the local market of foreign insurers from strange countries offering cheap and flexible policies hasn’t been a problem. Brokers can still access reputable foreign insurers for specialised products, so the principles of competition still rule the local market.
And what about Triton Underwriting? It’s still a proprietary company in Australia, but it’s no longer an underwriting agency. It’s now registered as a pastoral company.
Transpacific enjoyed a brief flurry of notoriety in 2003 – a time when the industry’s regulator started to worry about the number of overseas-domiciled insurers taking advantage of a capital crunch and a very tough local market. There were few, if any, restrictions on their entry, which miffed licensed insurers but made life easier for the small number of local brokers who used them.
In March 2003 the company found itself under the Australian Securities and Investments Commission’s (ASIC) blowtorch.
ASIC had been keeping a close eye on “unlicensed foreign insurers” entering the market, and the corporate watchdog “became aware” of a relationship between Transpacific and local underwriting agency Triton.
It turned out that the directors of the two companies were pretty much the same people, and one director also owned a local insurance broker, Aradlay, which was spruiking their products.
Just as interesting was the fact that Transpacific was licensed in the Cayman Islands, a Caribbean country which allowed insurers to register themselves – for a fee – as long as they didn’t actually conduct business there.
(That wasn’t unusual at the time. Even New Zealand allowed companies with very limited resources to register as insurers, but only if they conducted their business elsewhere, like Australia.)
Contrary to a report published recently in another online news publication, Transpacific was never registered as an insurer in Australia. It would probably never have been able to meet the strict criteria Australia set then and now for locally registered insurers.
In June 2004 ASIC obtained orders and declarations in the NSW Supreme Court that Transpacific and Triton had carried out a financial services business between August 2002 and March 2004 without a financial services licence.
The two companies agreed they had made false and misleading statements, including that they had a licence from the Cayman Islands Government to operate in Australia and that Transpacific had $40 million in paid-up capital.
They also agreed to cancel any policy on request and return the balance of the premium.
Transpacific Insurance was next heard of in 2007, when the Gibraltar Financial Services Commission issued a notice warning that a company of that name with an office in Gibraltar – but no authorisation to carry on insurance business there – had not renewed its licence with the Anjouan Offshore Finance Authority.
Anjouan is an island in the Comoros group, in the southern Indian Ocean. Not much happens there, although last year the island was invaded by a French-African Union force which ousted its military dictator.
Transpacific’s provisional liquidator, appointed by the NSW Supreme Court last month, is now examining the company’s books and its liabilities to decide if claimants and other creditors can be paid out. It’s not known at this stage how much debt the company is carrying.
The company will probably be wound up by the NSW Supreme Court on June 1, because it seems unlikely it will be able to trade its way out. With it will go an interesting story from a difficult period for the industry.
It was companies like Transpacific that finally convinced the Federal Government it had to do something about direct offshore foreign insurers, or DOFIs. Legislation now places tough restrictions on brokers wanting to access foreign insurers for local business.
So far the absence from the local market of foreign insurers from strange countries offering cheap and flexible policies hasn’t been a problem. Brokers can still access reputable foreign insurers for specialised products, so the principles of competition still rule the local market.
And what about Triton Underwriting? It’s still a proprietary company in Australia, but it’s no longer an underwriting agency. It’s now registered as a pastoral company.