A question that is on many lips lately with the global meltdown and large institutions in the US falling apart faster than Michael Jackson’s nose. Many of the other large institutions are looking frighteningly similar to Jacko aswell.

Unlike our American countrparts, we are governed by a defined set of laws in Australia through the likes of ASIC (Australian Securites & Investment Commission) and APRA (Australian Prudential Regulatory Authority). You may have heard of these two organisations. The easy way to explain what they do is; APRA looks after all the big organisations such as banks and insurers to ensure they are doing the right thing with their money. ASIC overseas all of the institutions and individuals who are giving advice to others, such as financial planners, company secretary’s, etc.

Considering they are government organisations, they have had their fair share of stuff ups in the past, but overall they do a pretty good job of keeping the mongrels honest. APRA has a set of rules for insurers especially. They MUST have a mimimum of 30% of their insurance policies in cash held at any one time. This is in case something catasrophic goes wrong and the fan gets dirty.

There have only been a handful of times that insurers didn’t meet these requirements, and because APRA has quite a stringent hold on that requirement, the insurer responsible was required to stop trading until theu sorted themselves out and had the required funds in their account.

Australia has some tough laws pertaining to the minimum standards for insurers, but these dont apply to ‘General Insurers’ because they have such a large turnover of claims, it’s quite hard to manage that type of capital. general insurers are easily identified by offering car insurance, Public liability, etc. But that’ for another time. I hope that helps.

PD