Some dubious direct offshore foreign insurers (DOFIs) operating in Australia have concerned insurers and brokers for years, and at last the Federal Government has made a decisive step towards some form of control.

The operation of DOFIs in Australia – which can sell their products to local policyholders without an Australian financial services licence – was examined by the HIH Royal Commission, and was the subject of a major Treasury review in 2004. That review suggested DOFIs should be allowed to operate in Australia as long as the Australian Prudential Regulation Authority (APRA) believed the insurer was from a country that had “comparable regulation” to APRA.

That would allow a number of rock-solid insurers based in countries like the US and the UK to continue to provide limited coverage through underwriting agencies.

Treasury is accepting submissions from the industry until February 24.