The Federal Government has listened to advice and amended regulations for offshore insurers, announcing wide-ranging exemptions that allow brokers a free hand to self-regulate.

Assistant Treasurer Peter Dutton has said big business and insurance brokers will have unfettered access to insurance from direct offshore foreign insurers (DOFIs) that are not regulated by the Australian Prudential Regulation Authority (APRA), provided one of three tests is met.

The "three limb" approach suggested in a Treasury exemption paper means if the relevant conditions for each "limb" can be met, the DOFI doesn't need to be regulated for that particular risk.

Brokers will also be free to buy insurance from an unregulated DOFI if they can meet the conditions.

National Insurance Brokers Association (NIBA) Chief Executive Noel Pettersen told Sunrise Exchange News the regulations seem to strike a balance between protecting customers and keeping insurance markets open to business.

"The paper recognises the important role played by brokers and suggests they may be entrusted with the practical administration of specific exemption arrangements," he said. "It now seems likely a workable exemption arrangement will be put in place that can be supported by NIBA."

Federal Parliament passed new laws this month requiring all offshore insurers to be regulated by APRA. The new regulations stipulate that insurance brokers can source cover only from regulated insurers or face penalties under the Corporations Act.

However, a discussion paper released by Mr Dutton last week suggests companies and insurance brokers will be given a degree of leeway in what cover can be bought from non-approved insurers.

"The Government has always recognised that there will be occasions where some Australian businesses will need access to the international insurance market, either because of their particular characteristics or the unique nature of the risks to be insured," Mr Dutton said.

So-called "high value insured" or larger companies will be free to buy insurance from unregulated carriers if they meet one of three benchmarks: more than 300 employees, operating revenue of more than $200 million or gross assets of more than $200 million.

The Government is also proposing exemptions for insurance brokers placing niche cover such as kidnap and ransom, commercial hull, political, nuclear, asbestos and war.

Under the third limb, companies or individuals with specific risks that domestic insurers are unwilling or unable to insure can apply for an exemption. This will be regulated by APRA and the Australian Securities and Investments Commission on a case-by-case basis.

The main change for insurance brokers is a new rule requiring them to inform their clients of the risks of using a DOFI before they place the cover - a rule that has been in place for NIBA members for some time, and was formalised in the revised Insurance Brokers Code of Practice launched on January 1.