An Australian Securities and Investments Commission (ASIC) review into the use of unauthorised foreign insurers (UFIs) has uncovered breaches of the law.

Executive Director FSR Ian Johnston says the ASIC review detected several apparent breaches of the law – mainly relating to registration, disclosure and dispute resolution requirements – and investigations have begun.

The ASIC review examined the practices of eight intermediaries who placed $145 million in premiums with nine UFIs between January 1 2002 and June 30 2003.

Five of the investigated intermediary businesses – which were not identified by ASIC – shared directors, shareholders or parent company ownership with UFIs. Of these, three didn’t disclose the relationships.

Mr Johnston says most intermediaries informed policyholders their insurer was a UFI but four made misleading statements about the status of the relationship.

The review is separate from the examination by the Australian Prudential Regulatory Authority (APRA) into the regulatory regimes of other countries.

UFIs came into the limelight when they were identified as a possible risk to consumers by HIH Royal Commissioner Justice Neville Owen. He was concerned they could offer insurance products to consumers without having to meet Australia’s prudential regulation and financial requirements.

Treasury commissioned former Treasury executive Gary Potts to review the use of UFIs in Australia. Following the partial release of the review, Treasury asked APRA to review the regulatory regimes of other countries, and if necessary, bar countries from offering insurance here if their regulatory regimes weren’t up to scratch.

So far the regulator has reviewed – and approved – only Germany’s regulatory regime.