Credit licensees will be required to hold PI cover for up to $2 million per claim under regulatory guidance released by the Australian Securities and Investments Commission (ASIC).

Under the recently introduced National Consumer Credit Protection Act, certain credit licensees and insurers must hold PI cover or make other arrangements to offset the cost of potential claims.

Exemptions to the new arrangements include credit providers who are only lending, and Australian Prudential Regulation Authority-regulated entities.

ASIC Commissioner Peter Boxall says the amount of “adequate insurance” required will vary, but minimum requirements have been set as a guideline.

“ASIC will administer the compensation requirements with the objective of reducing the risk that credit licensees cannot meet claims for compensation, due to insufficient financial resources,” Mr Boxall says.

“Whether a PI insurance policy for credit licensees is adequate depends on the amount and scope of cover and the relevant terms and conditions of that policy.”

Besides setting a minimum benchmark of $2 million per claim, ASIC has also stated cover should be “approximately equivalent to actual or expected revenue from credit activities relating to consumers, up to a capped maximum of $20 million”.