Just in case you were wondering… yes, the insurance industry does support the fast-tracking of the new General Insurance Act.

In a statement late last week, the Insurance Council said ICA’s support for the reform process has been “unequivocal” – a fact that might not have been obvious from statements made by Financial Services and Regulation Minister Joe Hockey.

The ICA “statement of support” was prompted by Mr Hockey’s continued allegations that the industry is dragging its heels on prudential reform. But Executive Director Alan Mason fired off a statement: “Despite some reports to the contrary, the industry can reassure policyholders that it not only supports these reforms, but that the industry is financially secure and is able to meet its new requirements.

The reforms are expected to have a substantial impact on the industry, with the minimum capital requirement being raised by an estimated average of 50%. Some companies presently operating on the $2 million minimum requirement [are] facing increases of 150%.

Overall, it is expected that the legislative capital requirement for the industry will increase by in excess of $2 billion.

According to Mr Hockey, about 25 of the 153 general insurers currently operating in Australia will need to raise additional capital under the new arrangements. It’s understood these companies don’t have a parent to provide that additional capital.

“The majority of these are very small insurers that will be required to move from the current absolute minimum test of $2 million in net assets to a capital adequacy test of $5 million,” he said.