The Financial Accountability Regime (FAR) is probably going to apply to the insurance industry in the second-half of next year, after legislation for the Hayne royal commission-backed measure was introduced in the Senate last week.

Legislation for FAR and another Hayne-backed reform, the Compensation Scheme of Last Resort (CSLR), cleared the House of Representatives and is now awaiting passage in the Senate.

McCabes Principal Mathew Kaley says the Senate only has a few more sitting days this month and it seems likely the FAR bill will not be progressed further during that time.

“Given that an 18-month transition period remains in the bill, insurers are therefore looking towards a start date at the tail end of 2024,” Mr Kaley said.

FAR is an extension of the Banking Executive Accountability Regime and will apply to all Australian Prudential Regulation Authority-regulated entities including insurance when the legislation receives Royal Assent.

It is one of the last remaining financial sector reforms recommended by the Hayne royal commission.

“The aim of the FAR is ultimately to strengthen and increase individual and entity level accountability across the financial services sector, including for non-financial conduct risk,” law firm Minter Ellison said.

FAR and its Financial Accountability Regime (Consequential Amendments) Bill 2023 include an amendment proposed by Independent Senator for the ACT David Pocock.

The amendment articulates “more clearly the scope of the minister's exemption power and to provide for parliamentary oversight of the exercise of that power,” Financial Services Minister Stephen Jones said in his second reading speech in the House of Representatives.

However, a proposed amendment from the Greens for the legislation to include individual penalties for breaches of accountability obligations was defeated in the House of Representatives.

Minter Ellison says FAR Bill 2023 is very similar in substance to, and essentially replaces the 2022 FAR Bill.

Senate passage of FAR Bill 2022, which was introduced last year, stalled after the Albanese Government decided not to press ahead with the Greens’ amendment to include civil penalties of up to $1.1 million for individual executive breaches. The Bill had already progressed through the House of Representatives.