In order to determine whether you need to be:

• authorised by APRA to carry on a general insurance business in Australia (Part III Division 1 Insurance Act 1973)and/or
• hold an Australian Financial Services Licence (AFSL) to provide financial services in Australia (such services include general insurance) (Section 911A Corporations Act)

its necessary to consider whether you are carrying on an insurance business in Australia.

Sources: Sutton on Insurance Law, Enright, Merkin, Hawke, Lawbook Co 2025 and ASIC Regulatory Guide RG 121

Carrying on Business

The concept of ‘carrying on a business’ has been interpreted by the Courts and is also affected by section 21 Corporations Act.

It should be noted that carrying on a business in Australia depends on the factual circumstances. However generally:

• include the degree to which a body corporate’s activities in Australia are conducted with system, repetition and continuity;
• the relevant activity need not generate or be motivated by profit;
• the business may be a carried on as part of or in conjunction with any other business; and
• it may be carried on alone or in conjunction with others.

In Australia

Section 21 provides that a body corporate has a place of business in Australia if the body corporate:

• establishes or is using a share transfer office or share registration office in Australia; or
• is administering, managing, or otherwise dealing with, property situated in Australia as an agent, legal personal representative or trustee, whether by employees or agents or otherwise.

Section 21(3) provides a number of factors that in and of themselves do not indicate that a body corporate carries on a business in Australia. If you:

a) are or become a party to a proceeding or effect settlement of a proceeding or of a claim or dispute;

(b) hold meetings of your directors or shareholders or carry on other activities concerning your internal affairs;

(c) maintain a bank account;

(d) effect a sale through an independent contractor;

(e) create evidence of a debt or create a charge on property;

(f) secure or collect any of your debts or enforce your rights in regard to any securities relating to such debts;

(g) conduct an isolated transaction that is completed within 31 days, not being one of a number of similar transactions repeated from time to time; or

(h) invest any of your funds or hold any property

Inducing

If you engage in conduct that is ‘intended to induce people’ in Australia (or you engage in conduct that is likely to induce people in Australia) to use financial services you provide, then you will need to hold an AFS licence, unless an exemption applies.

This is because of the deeming provision in s911D, which says that such conduct is ‘taken to be’ carrying on a financial services business in Australia. ASIC have granted specific exemptions that may apply: see ASIC Corporations (Foreign Financial Services Providers—Limited Connection) Instrument 2017/182 for ‘inducing’ wholesale clients, which applies until 31 March 2027. (refer RG 121.50)

ASIC provides the following example in Table 1 of RG 121 of ‘inducing’ conduct that indicates you are likely to need an AFS licence:

You are an insurance company in Singapore and you place advertisements in an Australian newspaper promoting your products

Insurance Act – Insurance business

Section 3 of the Insurance Act defines general insurance business as ‘undertaking liability, by way of insurance (including reinsurance)… and includes any business incidental to insurance business’.

The requirement to be authorised (by APRA) depends on whether the insurance business is carried on in Australia. This includes where there is a link to Australia created by an intermediary used by the person for the insurance business.

General insurers, including the local branch of a foreign insurer, are authorised by APRA under section 12 of the Insurance Act. Lloyds underwriters are deemed authorised under section 93 of the Act.

General insurance brokers holding an AFSL, are responsible for ensuring that the use of unauthorised foreign insurers (that is, not authorised under the Insurance Act) meet one of the exemptions in the Insurance regulations (Part 2), and provide the prescribed notice in writing to clients and include on FS 701 reporting to APRA. The exemptions are:

• high-value insured;
• Atypical risks (se listed);
• cannot reasonably be placed in Australia; or
• required by foreign law.

Carrying on insurance business

This involves a number of individual arrangements or transactions that have sufficient connections with Australia. This also requires a consideration whether the arrangements or transactions are carried on with a regularity and frequency for there to be carrying on a business.

It is clear that underwriting or entering into contracts in or issuing policies from Australia would constitute carrying on insurance business in Australia. It is also likely that paying claims by itself can constitute carrying on an insurance business. It is possible that the supply of administrative or operational services may constitute carrying on insurance business.

The requirement to hold an AFS Licence to carry on a financial services business in Australia

A financial product includes general insurance.

Providing a financial service, relevantly, includes:

• provide financial product advice;
• deal in a financial product; or
• provide a claims handling and settling service.

Dealing includes:

• applying for or acquiring a financial product;
• issuing a financial product;
• varying a financial product;
• disposing of a financial product; or
• arranging for a person to engage in any of the above conduct.

Certain exemptions apply to holding an AFS Licence including:

• being appointed as an [authorised] representative of a Licensee;
• being a body regulated by APRA and the service is provided to wholesale clients only (this extends to representatives of the insurer acting under a Binder Agreement);
• foreign financial services provider for wholesale clients and subject to a comparable regulatory regime; or
• Lloyd’s underwriters providing financial services only to wholesale clients including claims handling structured through an arrangement involving an appropriately authorised licensee (such as a TPA).

Discretionary Mutual Funds

A mutual (owned or controlled by its members) which does not contract for the member to have a right to indemnity, but instead has a discretion whether or not to pay the claim or merely contracts to consider the claim fairly, does not enter into insurance contracts and therefore does not carry on insurance business.

The DMF is not permitted to describe itself as an insurer or use the restricted term insurance (refer s114 Insurance Act). Generally, the DMF will use the term ‘protection products’.

Summary

To understand whether you need to be authorised by APRA (to carry on an insurance business in Australia) and/or licensed by ASIC (to carry on a financial services business in Australia) you need to consider:

• whether you are carrying on a financial business;
• the business being insurance or insurance products;
• the location of the business either actually or deemed to be in Australia; and
• whether any exemptions apply (for the purposes of holding an AFSL); or
• the business is an Unauthorised Foreign Insurer or Discretionary Mutual Fund (for the purposes of APRA authorisation).

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