A lobby group representing the nine national law firms in Australia is gearing up to fight moves by the Federal Government to regulate direct offshore foreign insurers (DOFIs).

The Government will make DOFIs adhere to the same Australian Prudential Regulation Authority (APRA) regulations and capital requirements as local insurers. There will be exemptions, but they are yet to be announced.

Most of the large law firms in Australia obtain their insurance from companies in the US, the UK and Canada. They say they fear insurance will become too costly under the new DOFIs law.

Like the National Insurance Brokers Association (NIBA), the Large Law Firm Group (LLFG) is waiting to see the detail of the Government’s initiative. The lawyers hope the exemptions will mean large corporations and sophisticated users of insurance will still be able to buy insurance from DOFIs.

The LLFG met the Law Council of Australia on Friday to discuss the issue.

NIBA CEO Noel Pettersen says insurance brokers are also concerned that their larger and more sophisticated clients could be prevented from accessing the world’s insurance markets.

In a letter published in the Australian Financial Review today, he says the impending rules regulating DOFIs “should not… be directed at foreign insurers that are subject to quality supervision in their home jurisdictions or to their Australian clients that have a well developed insurance plan”.
 
“Limiting access to foreign insurers will lead to restricted availability, higher premiums and a lower level of competition in the Australian insurance market,” Mr Pettersen said. “It is not in Australia’s best interests to have its citizens denied access to the insurance coverage and expertise offered by high quality overseas insurers.”

While noting the lawyers’ concerns, he says businesses using DOFIs include companies operating in the engineering, mining and natural resources, construction, pharmaceutical, chemical and agribusiness sectors.