The insurance industry enters a new era next week as key legislation takes effect restricting the activities of foreign insurers in the Australian market.

From next Tuesday, direct offshore foreign insurers (DOFIs) are required to be authorised under the Insurance Act or cease operating in Australia.

The Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007 also places responsibility on brokers to ensure they are dealing with products from authorised insurers or a Lloyd’s underwriter.

InsuranceNEWS.com.au understands up to a dozen DOFIs have applied to APRA for authorisation, in addition to Axis Specialty Europe, which last month was granted a licence to continue writing professional liability policies for the Dexta underwriting agency.

The Government has granted a six-month period of grace for DOFIs which have applied to APRA for regulation prior to July 1.

The new regime allows for exemptions across four categories – high-value insured, atypical risks, insurance contracts required by foreign law and customised.

Under the new legislation, brokers are required to maintain records of business placed with DOFIs and report their dealings to the Australian Securities and Investments Commission (ASIC). Late last month Assistant Treasurer Chris Bowen heeded brokers’ calls to defer reporting requirements for three months to October 1 to give them extra time to adjust their systems.