The Underwriting Agencies Council (UAC) has cautiously welcomed the Federal Government’s proposals on how it will regulate direct offshore foreign insurers (DOFIs).

Chairman Murray Rogash says UAC can offer only qualified support for the proposal until there is more information from the Government. He says Assistant Treasurer Peter Dutton’s announcement two weeks ago gave the “bare bones” only, and UAC will await details that will allow members to understand the Government’s intent.

“The devil may well be in the detail,” he said.

UAC’s attitude is similar to that of the National Insurance Brokers Association. The brokers’ group has given qualified support to the plan but expressed concern about local insurers’ ability to provide cover across the board when the market hardens.

The DOFI proposal outlines limited exemptions when clients are unable to obtain appropriate cover in Australia and need access to the global insurance market. Mr Rogash questions who will determine the exemptions and on what basis. “Is the criterion to be availability of a product in Australia, or availability at a reasonable price?”

He says continuity of cover is vital for insureds, particularly for professional risk lines. “Availability of cover and capacity changes as the market fluctuates,” he said. “Will we have a situation where a line is available from an exempted underwriter one year and not the next because domestic capacity has changed?”

Mr Rogash says some UAC members place only small portions of their business with DOFIs, and it’s unlikely those DOFIs will pay for being regulated in Australia when the income from Australia is very low.