First American Title Insurance Company of Australia Pty Limited receives Reserve Bank warning Industry Notice
The Reserve Bank is reminding insurers of the importance of meeting their disclosure obligations under the Insurance (Prudential Supervision) Act 2010 (the Act). It does this after sending a warning to First American Title Insurance Company of Australia Pty Limited (First American) for failing to disclose an overseas policyholder preference to a policyholder. Under Australian law, Australian policyholders have preference over other policyholders in the event First American is wound up.
In June 2017 the Reserve Bank conducted a thematic review on insurers’ obligations under the Act to disclose financial strength ratings and solvency information. The review surveyed a sample of 36 of the 89 licensed insurers, including First American. The report found that compliance with disclosure obligations by a number of the reviewed insurers was well short of minimum requirements. As a result, the Reserve Bank engaged with insurers with poor or low compliance to resolve the issues identified in the review.
First American is an exception to the satisfactory remediation efforts by all other licensed insurers reviewed by the Reserve Bank. Despite ongoing engagement with the Reserve Bank, First American failed to demonstrate that it had disclosed an overseas policyholder preference to a policyholder in writing as required by section 72 of the Act, or the procedures in place to make such a disclosure to any new policyholder.
First American is taking steps to remediate the identified issues.