australia

Principal Legislation

The Australian insurance industry is governed by federal law. Key pieces of legislation applicable to both life and general (non-life) insurers include:

• Insurance Act 1973
• Insurance Contracts Act 1984
• Corporations Act 2001, incorporating the Financial Services Reform Act 2001
• General Insurance Reform Act 2001
• Australian Securities and Investments Commission Act 2001
• Australian Prudential Regulation Authority Act 1998
• Privacy Amendment (Private Sector) Act 2000 (now part of the consolidated Privacy Act 1988)
• Competition and Consumer Act 2010

The following laws are specific to the non-life (general insurance) sector:

• Marine Insurance Act 1909
• Medical Indemnity Act 2002
• Terrorism Insurance Act 2003
• Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Act 2007
• Financial System Legislation Amendment (Financial Claims Scheme and Other Measures) Act 2008
• Superannuation Guarantee (Administration) Amendment Act 2011

Supervision

Australia has two supervisory authorities: the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC). Both were established on 1 July 1998 and oversee the entire retail financial sector, including deposit-taking institutions, life and non-life insurance companies, friendly societies, and superannuation schemes.

APRA is responsible for the licensing and prudential regulation of financial institutions. ASIC handles consumer protection matters, such as product disclosure standards, complaints handling, licensing of intermediaries, administration of the Insurance Contracts Act, and oversight of the insurance industry’s code of practice.

As of March 2025, insurers are also subject to the Financial Accountability Regime (FAR), which increased accountability and governance obligations on senior executives and directors. Notably, the obligations include insurer’s regulatory compliance, risk management and culture.

The main industry associations are:

• The Insurance Council of Australia (ICA) for non-life insurers.
• The Financial Services Council (FSC) (formerly IFSA) for life insurers and financial service providers.

Admitted/Non-Admitted

Unauthorised insurers (known locally as unauthorised foreign insurers (UFIs)) are not allowed to carry on insurance business in Australia. However, except for certain compulsory classes, there is no legal requirement that insurance must be purchased from locally authorised insurers. This means unauthorised insurers can issue most types of policies from abroad if directly approached by an Australian buyer.

Since 1 January 2022, any entity providing claims handling and settling services in Australia must hold an Australian Financial Services Licence (AFSL) with the appropriate authorisation. This requirement applies to both authorised and unauthorised insurers conducting these activities within Australia.

In certain circumstances, unauthorised insurers may also insure large or complex risks offered to them by Australian insurance brokers. Insurance intermediaries (brokers and agents) must be authorised to operate in Australia and are not permitted to place Australian business with unauthorised insurers except for large or complex risks, as defined in legislation.

Unauthorised insurers (known locally as direct offshore foreign insurers (DOFIs)) cannot carry out insurance activity in Australia. At the same time, there is nothing in the law requiring insurance to be purchased from locally authorised insurers, with no exceptions affecting life, pensions, or private medical insurance. This is interpreted to mean insurers can issue policies from abroad if approached by a buyer.

The legislation seeks to prevent both the soliciting of life business, and individuals acting as agents of a person or entity conducting life business, from outside Australia.

Compulsory Insurance

• Workers’ compensation
• Motor third party liability for death and bodily injury
• Liability for maritime oil pollution
• Aviation passenger liability
• Satellite launch operators’ liability
• Builders warranty (all states and territories except Tasmania)
• Medical indemnity for medical practitioners (certain states and territories only)
• Professional indemnity for property, stock and business agents (New South Wales only)
• Professional indemnity for tax and business activity statement (BAS) agents
• Professional indemnity and fidelity guarantee for registered liquidators
• Professional indemnity for insurance brokers
• Professional indemnity for other retail Australian financial services licence (AFSL) holders
• Professional indemnity for midwives
• Health insurance for holders of subclass 457 visas and their families
• Clinical trial liability insurance (Victoria and New South Wales)
• Residential strata insurance (property damage and third-party liability)

State Involvement

The federal government owns the Export Finance and Insurance Corporation (EFIC) and there are 14 other public sector insurers which are mainly owned by individual states and territories.

Domestic reinsurance premium volumes rose strongly from 2008, partly as a reflection of rising catastrophe claims, and partly because of a change in reinsurance regulations which increased the cost of doing business with non-admitted reinsurers. There is now a clear advantage to both cedants and reinsurers in doing business onshore, which has led to an increase in the number of resident reinsurers.

Terrorism reinsurance is provided by a statutory body, the Australian Reinsurance Pool Corporation (ARPC), which commenced operations on 1 July 2003 under the terms of the Terrorism Insurance Act 2003. Since July 2022, the ARPC has also administered a Cyclone Reinsurance Pool, established by the federal government for cyclone and related flood cover.

Life reinsurers operate under essentially the same regulatory framework as direct insurers regarding capital, solvency, reserves, and taxation. APRA updated Prudential Standard LPS 117, effective 1 July 2023, to limit life insurers’ exposure to offshore reinsurers and better manage concentration risk.

All health benefits organisations (HBOs) reinsure through an industry pool managed by the Private Health Insurance Administrative Council (PHIAC).

Australia has approximately seven active professional reinsurers, which collectively wrote net reinsurance premiums of approximately AUD 2.7 billion in 2024. These reinsurers are primarily subsidiaries of multinational groups, alongside the Australian Reinsurance Pool Corporation (ARPC), a government-backed entity playing a significant role in the market. The reinsurance market is highly concentrated, with the top reinsurers estimated to account for around 75% to 80% of gross premiums. Australia also has a developed life reinsurance market supplied by several major US and European professional reinsurers.

Personal and commercial lines have distinct distribution patterns: commercial business has traditionally been broker-led, though recent trends show an increasing mix of broker and direct channels reflecting changing client preferences. Personal lines are predominantly sold direct, maintaining strong consumer engagement through direct channels.

Brokers are adapting by offering more tailored solutions and leveraging technology to better serve clients, which is driving demand for specialised and customised reinsurance products to manage evolving risk profiles.

Financial advisers dominate the Australian life market distribution, though fewer than 500 advisers wrote half of all new life insurance policies in 2023, indicating increased market concentration.

Parts of Australia have a moderately high earthquake exposure arising from intra-plate or continental convulsions. In addition to earthquakes, the shores of eastern and northern Australia are also exposed to tsunamis. Windstorms and associated effects such as rain and hail are the most destructive perils in Australia. Windstorms occur as tropical cyclones in the north and thunderstorms elsewhere.

Flooding occurs from both coastal and inland rivers. Bushfire exposure is considered significant and continues to increase, driven by climate change, prolonged dry periods, and expanding development into bushland areas.

In response to rising natural hazard risks, regulatory reforms—such as the establishment of the National Emergency Management Agency (NEMA — have placed greater emphasis on disaster preparedness and resilience. These developments reinforce the critical role of insurance and reinsurance in supporting risk transfer strategies and ensuring long-term protection for clients across all sectors.