Update:

PI Insurance - from 1 July 2008

For most AFSL holders, new compensation requirements will commence on 1 July 2008.  AFSL holders must meet ‘implementation period’ requirements until 30 June 2010 after which more extensive ‘adequate insurance’ requirements will apply.

Generally, the ‘implementation period’ requirements include:

• the amount of cover must be at least $2million for any one claim and in aggregate for licensees with total revenue from retail clients of $2million or less.  For licensee with total revenue of greater than $2million minimum cover should be approximately equal to actual or expected revenue, up to a maximum of $20million;
  
  
• at least one automatic reinstatement is required unless the limit is at least twice the required minimum;
  
  
• legal costs must not be included in the minimum cover;
  
  
• the policy must include liability for for fraud or dishonesty by directors, employees and other representatives of the licensee and under EDR award schemes;
  
  
• retroactive cover is required if the licensee had an immediately previous PI insurance policy;
  
  
• any excess must be at a level that the business can confidently sustain as an uninsured loss; and
  
  
• in the implementation period policies do not have to provide ‘run off’ cover.

Licensees must also disclose in its FSG and its representatives’ FSG that PI cover is in place and explain whether the insurance will cover claims in relation to the conduct of employees/representatives who no longer work for the licensee but did at the time of the conduct.

Further enquiries