I’m often asked to outline what is involved in obtaining an AFS Licence in Australia for general insurance.
I have assisted many people to obtain a new AFS Licence, vary an existing Licence and add new responsible managers.
The process to obtain an AFS licence to provide general insurance services or products is not overly complex however, it is time-consuming and labour-intensive, as ASIC’s information requirements are specific. All AFS licence applications (new and variations) must be submitted via ASIC’s online regulatory portal. I assist my clients in setting their business up in the portal and providing me with access so that I can facilitate the application for them.
My typical clients requiring a new AFS licence include:
- insurance brokers who are currently authorised representatives;
- people who want to operate an Underwriting Agency in Australia (including Lloyds coverholders);
- foreign companies that want to provide financial services in Australia; and
- people wanting to provide claim services either for insurers (insurance claim managers) or insureds (claimant intermediaries)
I manage AFS Licence variations (including adding responsible managers) for insurers, brokers, underwriting agencies, claim service providers and anyone who currently has an AFS Licence for general insurance products
Typical general insurance authorisations
AFSL authorisations relevant for general insurance are:
- providing financial product advice including general financial product advice only;
- dealing including issuing (when acting on behalf of insurers) and dealing on behalf of another person (insurance brokers including obtaining the use of restricted broker terms); and
- claims handling and settling services on behalf of insurers or on behalf of an insured.
The financial services can be provided to Retail and/or Wholesale clients.
The AFS Licence application process
The process for a new AFS Licence application is more involved and complicated than a licence variation. This example deals with a new AFSL application however I can assist you with information requirements and the process for variations on request. Contact me here
ASIC provides guidance on the process and information requirements in RG 1 and INFO 294.
People requirements
Information must be provided to ASIC on your fit and proper people and your responsible managers.
Fit and Proper people
Section 913BA of the Corporations Act requires that, before a licence is granted, ASIC must be satisfied that there is no reason to believe that certain people involved in the management or control of your financial services business are not ‘fit and proper persons’ to undertake that role.
You will need to include details of your fit and proper people in the application (refer RG 1.138 – 1.166).
A fit and proper person is your ‘officers’ and this is defined in section 9 Corporations Act, relevantly to include:
- a director or secretary of the corporation; or
- person:
(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or
(ii) who has the capacity to affect significantly the corporation’s financial standing; or
(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person’s professional capacity or their business relationship with the directors or the corporation)
Fit and Proper people checks must be also be conducted for directors and officers of any controlling company (control is defined in section 910 Corporations Act)
You must provide the following for your fit & proper people:
- criminal check, no more than 12 months old; and
- a personal statement, using the prescribed form.
If any fit & proper person has worked or lived overseas for more than 1 year in the past 10 years you must provide a criminal and bankruptcy check from each country
Responsible Managers
You must also show that you have one or more responsible managers with the necessary competence to provide the services under its AFS licence, see Regulatory Guide 105 AFS licensing: Organisational competence RG 105. Also refer RG 1.167 – 1.186
Your responsible managers are the people who manage your financial services business and are responsible for significant day-to-day decisions about your financial services business.
In nominating responsible managers, you need to ensure each responsible manager meets 1 of the 5 options as per Table 1 of RG 105 & provide:
- a criminal check;
- a personal statement;
- details of qualifications; and
- details of experience.
Generally ASIC will impose a key person requirement condition on your licence if you only have 1 responsible manager.
Additional requirements
Depending on the AFSL authorisations that you require, your business model, your financial services and general insurance products and type of clients, you will be required to provide information about:
- your business type and registration;
- controlling entities including details of ultimate holding company;
- whether you are APRA-regulated or a subsidiary of an APRA-regulated body;
- business description: a detailed overview of the business (providing the information oulined in RG 1.36) and how you will generate income from the financial servcies;
- financial projections and resources to meet the base level financial requirements (refer RG 166). Prior to issuing the licence, ASIC will usually request financial statements;
- projected business growth over a 5 year period, the inherent risks associated with the proposed growth and strategies to manage such risks;
- distribution channel(s);
- location(s) of the business;
- an organisational chart containing the prescribed information;
- your website(s) and details of activities provided through the website(s);
- requirement to use restricted words and expressions;
- details of compliance arrangements;
- details of outsourcing;
- details of your auditor;
- details of authorised representatives and how you will monitor them;
- details of human resources;
- details of technology resources including measures for cyber security and business interruption;
- details of dispute resolution processes including AFCA membership;
- details of risk management processes;
- compensation arrangements. If you are not an APRA-regulated insurer you will need to provide ASIC with a copy of your PI cover before the licence is issued; and
- details for claims handling and settling.
Should you need compliance advice or assistance in obtaining a new AFS Licence or to vary your current AFS Licence contact me and we can have a discussion about your specific needs and requirements.
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