Explanatory Memorandum
(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)Chapter 8 - Enforceable undertakings
Outline of chapter
8.1 Part 7 of the Prudential Supervision Bill relates to APRA's ability to accept enforceable undertakings.
8.2 Unless otherwise stated, all references in this Chapter relate to the Prudential Supervision Bill.
Summary of new law
8.3 Part 7 is based on equivalent provisions in the Life Insurance Act. It enables APRA to obtain an enforceable undertaking from an insurer or a person who has had involvement with an insurer (for example, an actuary or officer), including in circumstances where lengthy legal action might otherwise be taken against that person.
Comparison of key features of new law and current law
| New law | Current law |
| APRA make accept an enforceable undertaking from a person in connection with a matter in relation to which APRA has a power or function under the Prudential Supervision Bill or the risk equalisation levy legislation. | The Council may accept an enforceable undertaking from a private health insurer if the Council considers that compliance with the undertaking will be likely to improve the insurer's operations in relation to a Council-supervised obligation. |
Detailed explanation of new law
Part 7 - Enforceable undertakings
Simplified outline
8.4 APRA may accept an undertaking given by a person in connection with matters relating to the Prudential Supervision Bill or the risk equalisation levy legislation. APRA may apply to the Federal Court for an order (for example, an order directing compliance) if APRA considers that an undertaking has been contravened. [Part 7, Division 1, section 151]
Enforceable undertakings
8.5 APRA may accept a written undertaking from a person in connection with matters in relation to which APRA has a power or function under the Prudential Supervision Bill (which will include prudential standards and APRA rules) or the risk equalisation fund legislation. [Part 7, subsection 152(1)]
8.6 The enforceable undertaking may be withdrawn or varied at any time, if APRA consents. [Part 7, subsection 152(2)]
8.7 A decision to consent or not to consent is given on a case by case basis and is therefore not a legislative instrument. Therefore the statement in subsection 152(3) therefore does not constitute a substantive exemption from the Legislative Instruments Act, rather it is a statement of the 'status quo'. This decision is not listed as a reviewable decision in section 168 of the Prudential Supervision Bill. This is to ensure that enforceable undertakings can be used to finalise issues and to avoid ongoing litigation. Furthermore, insurers voluntarily enter into enforceable undertakings. [Part 7, subsection 152(3)]
8.8 If APRA considers a person has breached an enforceable undertaking, it may apply to the Federal Court for various orders, including ordering:
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- compliance with the undertaking;
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- the person to pay to the Commonwealth any amount gained due to the breach; or
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- compensation to any other person who has suffered loss due to the breach. [Part 7, subsection 152(4) and (5)]