The Australian Law Reform Commission (ALRC) has dropped proposals it drafted in November aimed at increasing individual liability on insurers and other financial services industries.

Of 23 proposed reforms of corporate criminal responsibility set out in the ALRC’s Corporate Criminal Responsibility discussion paper, the Commission has decided not to proceed with two related to individual liability.

ALRC General Counsel Matt Corrigan told InsuranceNEWS.com.au the turnabout came after the Government’s Financial Accountability Regime (FAR) proposal paper was published in January.

“The ALRC considers the FAR should be given time to be implemented and reviewed for effectiveness in five years,” Mr Corrigan said.

Treasury’s FAR paper requires that financial entities clarify responsibilities attaching to particular officers and positions.

“As a result, individuals will be held to account for failure to perform their obligations,” the FAR paper said.

Under those changes, general insurers with at least $2 billion in total assets will be termed as “enhanced compliance” entities. Failure to comply with the regime could result in penalties set at 10% of the annual turnover of the body, but to a maximum monetary value of 2.5 million penalty units, which is about $525 million.

Executives would also face heavy fines of up to $1.05 million if they don’t comply with their obligations.

The ALRC’s now-scrapped proposals on individual liability for conduct recommended the Corporations Act be amended to provide that “any officer who is in a position to influence the conduct of the body corporate in relation to the contravention is subject to a civil penalty, unless the officer proves that the officer took reasonable measures to prevent the contravention”.

A second had recommended the act be amended to include an offence of “engaging intentionally, knowingly, or recklessly in conduct the subject of a civil penalty provision”.

The Insurance Council of Australia (ICA) warned in a submission that the ALRC’s proposal to replace the term “associates” with “officers, employees and agents” differed from the FAR paper and raised concerns regarding “the concept of influence and reversal of the onus of proof”, especially for individuals no longer employed by a company.