The Insurance Council of Australia (ICA) is concerned about “key aspects” of the proposed Financial Accountability Regime (FAR) that will impact on the successful implementation of the reforms, the peak body says in a submission to Treasury.

The concerns include implementation timeframe and administration of the scheme, which is a Hayne royal commission recommendation aimed at improving corporate conduct and culture in the financial services industry.

Other key concerns raised in the ICA submission extend to deferred remuneration, significant related entities of an accountable entity and end-to-end product responsibility.

In relation to joint Australian Prudential Regulation Authority-Australian Securities and Investments Commission administration of the regime, ICA says it supports the view that “efficient and effective joint administration of the FAR between the regulators would need to be underpinned by robust collaboration and coordination”.

“The [ICA] also believes it will be critical to ensure that any potential duplication is minimised so that the regime does not become administratively burdensome and overly costly,” the peak body said.

“It would be helpful for Treasury to articulate its expectations as to how the regulators will implement the FAR in a specific and clear way.

“We would welcome further consultation on the details of the proposed joint administration approach as it develops.”

FAR is expected to apply to insurers from the later of July 1 2023 or 18 months after its legislation receives royal assent, and the prudential regulator’s present intention is for CPS 511 to commence from July 1 2023.

CPS 511, the regulator’s proposed prudential standard to regulate remuneration, will likely require significant changes to insurers’ remuneration arrangements, ICA said.

“Given the many interlinkages between the FAR and CPS 511, it remains appropriate that these regimes commence at the same time,” ICA said.

ICA says Treasury sought feedback at a roundtable as to whether the general insurance industry would be able to implement FAR earlier than currently proposed.

“We confirm the view orally communicated that this will not be feasible, particularly given the aforementioned factors relating to remuneration arrangements,” ICA said.

“In addition, the industry is still dealing with a significant workload in implementing and bedding down other [Hayne royal commission] reforms and there are a range of other significant challenges facing the insurance industry in the current COVID-19 pandemic context, including supply chain disruptions.

“Further, we suggest that if the FAR commencement date for insurers is later than July 1 2023, for instance due to a delay in the FAR legislation receiving royal assent, that [the prudential regulator] defer implementation of CPS 511 to ensure alignment.”

Click here for the ICA submission for more details of concerns raised.