Nobody really likes unauthorised foreign insurers, but that doesn’t mean they’re not popular with brokers. They have to be, because all too often there’s no alternative. Daryl Roberts, the Australian Prudential Regulation Authority's (APRA) GM Enforcement, told Sunrise Exchange News many smaller Australian brokers are continuing to using unauthorised foreign insurers.

That worries the regulator, with Dr Roberts saying many businesses “are continuing to try to avoid the rising premiums relating to public liability and professional indemnity”.

Following discussions with the Federal Treasury, APRA is compiling a paper on the subject outlining some possible steps it might take to control the situation.

Dr Roberts says the situation makes APRA feel “uncomfortable” and reminded brokers of their duty to inform clients of the possible risks of using an unauthorised foreign insurer.  “We can’t stop people taking out policies with foreign insurers,” he said. “All we can do is encourage them to make full inquiries as to who they are actually doing business with.”

National Insurance Brokers Association President Frank Earl says he acknowledges that not all unauthorised foreign insurers are bad, but he is particularly concerned about “backyard” operations operating in places such as the South Pacific.

He said many foreign insurers appear to be legitimate “at face value. If you scratch behind the surface of these insurers, you’ve got to ask whether brokers will actually get their money when claims are made.”

Doug Ford, MD of Victorian regional broker Ford Kinter & Associates, says smaller brokerages are “extremely frustrated” and are being forced to use unauthorised foreign insurers

“It’s got to the point where we have been forced to travel to London and use unauthorised foreign insurers to get the relevant insurance for our clients’ needs,” Mr Ford said. “Many foreign insurers are reluctant to take on Australian risks because they are relatively expensive and unknown.”

Mr Earl said the new APRA guidelines “are very good at making sure onshore business is taken care of, but what about offshore? The Government has issued a lot of legislation in terms of licensing, but on this issue it seems like the door is closed.”