Managing agents wanting to set up a service company in Australia must be aware of the following considerations and requirements that make up the local environment.
Key considerations
Financial considerations
- Trust accounts must be established for premium collection, with a separate trust account designated for claims.
- Local taxes apply, including: Goods and Services Tax (GST), Emergency Services Levy / Fire Services Levy (ESL / FSL), Stamp Duty, and a 3% withholding tax.
- Engage a local tax accountant for advice, register for GST with the Australian Taxation Office (ATO), and register with each State Revenue Office to pay stamp duty.
- A separate Tax File Number (TFN) must be obtained to remit the withholding tax to the ATO.
Operational considerations
- A local office in Australia must be established and staffed with a resident underwriter.
- An Australian Financial Services (AFS) licence must be held. Seek local legal advice to ensure the correct type of AFS licence is obtained.
Employee considerations
- A resident employee must be based in Australia.
- A ‘Responsible Manager’ must be nominated for the Australian Financial Services (AFS) licence.
Regulatory considerations
- A new company must be registered with the Australian Securities and Investments Commission (ASIC), and an Australian Business Number (ABN) must be obtained.
- All Australian Financial Services (AFS) licensing obligations must be met, including Internal Dispute Resolution (IDR) reporting.
- Compliance with the Corporations Act 2001 is required.
- The General Insurance Code of Practice (GICOP) must be adhered to, including adopting the Code by signing a Deed Poll and completing the annual GICOP Data Return.
- Requests from Lloyd’s Australia for natural catastrophe data must be complied with.
- The responsibility for filing all returns with the Australian Prudential Regulation Authority (APRA) lies with Lloyd’s Australia and is managed centrally by the Corporation.
Launch Crystal+Local Requirements
- Set-up costs include obtaining legal advice on acquiring an Australian Financial Services (AFS) licence and paying lodgement fees to the Australian Securities and Investments Commission (ASIC).
Lloyd’s Australia – Complaints process- Managing agents must seek local advice to determine the most suitable company structure. The chosen structure will define the requirements for the number and residency of directors. Directors must apply to ASIC for a Director Identification Number (DIN) prior to their appointment to the Board.
- Policies covering Risk Management, Compliance and Governance, and Complaints Management must be submitted to Lloyd’s Australia at the time of application review.
- Service companies writing retail business (or entering into binders with Coverholders writing retail business) must ensure that claims handling is conducted locally by an Australian entity that holds the appropriate AFS licence and is approved by Lloyd’s.
- Lloyd’s Australia complaints process must be followed for all classes of business regardless of how they are distributed (except reinsurance).
- Lloyd’s Australia provides a dispute resolution service to the market, with associated fees charged back to the market.
- Fees from the Australian Financial Complaints Authority (AFCA) are also charged back to the market.
The service company must:
- Establish a local entity.
- Obtain the appropriate Australian Financial Services (AFS) licence — this process can take up to six months.
- Sign the General Insurance Code of Practice (GICOP) Deed Poll.
- Register with the Australian Taxation Office (ATO) and the relevant State Revenue Offices.
- Obtain a separate Tax File Number (TFN) to remit withholding tax to the ATO.
Lloyd’s registration process
Initiation
Co-ordinate with Lloyd’s teams to understand country interest, define service company and set timelines.
Register and setup
Managing agents will submit business plans and work with country managers for regional setup according to local regulations. In tandem the service company is registered on Atlas to complete necessary business and company details.
Due diligence
Managing agent’s maturity rating under PBO Principles is used to determine whether an Attestation or Decision Paper is completed, demonstrating satisfactory due diligence has been conducted.
Service Company Underwriting Agreement
Once all registration and set up requirements are met, formal service company underwriting agreement can be signed and service company can start trading on agreed date.