Cairns-based underwriting agency Dominion Underwriting has ceased placing insurance with Philippines-based unauthorised foreign insurer South Sea Surety. How that will impact on an unknown number of policyholders is difficult to estimate at this time.

Dominion CEO Don Christie told Sunrise Exchange News yesterday that despite repeated requests to South Sea, he has been unable to ensure the financial security of the proposed new reinsurers to replace the Philippines Government Services Insurance System carrier, GSIS.

A simple internet search last week failed to turn up any information about whether GSIS ever acted as South Sea’s reinsurer. In fact, there is no information about reinsurance arrangements for non-government parties that we could find on the extensive GSIS file.

Mr Christie says he is concerned as to why GSIS is no longer South Sea Surety’s reinsurer and when it ceased to accept business. He says there is serious doubt whether GSIS has, in fact, been South Sea Surety’s reinsurer in respect of any of the current Australian contracts arranged on its behalf.

In a note to brokers who have placed business through Dominion, he says the latest information from the Philippines “is contrary to what we have been led to believe on the basis of prior discussions and clear reinsurance treaty documentation from both South Sea Surety and GSIS itself”.

Yesterday’s “urgent update” from Dominion Underwriting stated that Dominion has no present reason to suppose that South Sea Surety is in any way unwilling or unable to meet its liabilities in full under all current contracts of insurance.

“As brokers will be aware, a substantial portion of all premiums received on behalf of South Sea Surety have been retained in Australia in a trust account operated by Proclaim Management Services for the payment of Australian claims,” the letter says.

Mr Christie says Dominion “is taking steps to ensure those funds remain available onshore for their designated purpose”. It’s understood this fund stands at $3 million. Whether this is sufficient to meet all possible claims has not been established.

Sunrise Exchange News was keen to ascertain how much business has been placed with South Sea, what type of cover it was and how much of it is long-tail business. We’ll keep our readers posted on this issue as it develops.