Queensland-based underwriting agency Dominion Underwriting has suspended operations while it reviews its overseas security.

Last week the underwriter was advised by its Philippines-based unauthorised foreign insurer (UFI), South Sea Surety, that it has increased capitalisation and provided a new panel of reinsurers to replace GSIS.

Dominion CEO Don Christie told Sunrise Exchange News he was concerned by the move and has requested more information about the proposed reinsurers. He also wants to know why GSIS has withdrawn its support.

GSIS is the Government Service Insurance System. It is owned by the Philippines Government, administering public service pensions, covering government property and engaging in some limited general insurance activities within the Philippines. South Sea Surety is a long-established company in Manila. Its paid-up capital in 2000 – the most recent records we have been able to access – was 10 million Philippines pesos – about $250,000. This places it in the bottom rank of insurers registered in the Philippines.

Mr Christie said he had hoped to have more information about the new reinsurance panel by yesterday. “We’ve had some information on the reinsurers but it’s not enough.”

As a result Dominion Underwriting issued an urgent letter to clients headed “Dominion assessing new reinsurers”, which stated that during the period of voluntary suspension Dominion will not quote or bind cover on behalf of South Sea Surety.

It is understood that Dominion Underwriting asked South Sea Surety to approve an increase in the size of its Australian-based claims fund, but was rejected. The fund remains with claims specialist Proclaim and is understood to be about $3 million.

National Insurance Brokers Association (NIBA) President Frank Earl says the suspension reinforces the necessity for the Australian Government to be more active on the issue of UFIs. 

He says the Potts inquiry into UFIs should have been stronger in its recommendation for action. “The Potts review needs to include two requirements, both heavily supported by NIBA.

“The first is that insurers should be based in countries where the regulatory environment is not dissimilar to Australia’s. Secondly, they should have a credit rating of A-minus or better.”