Review of Discretionary Mutual Funds and Direct Offshore Foreign InsurersAustralian Government, Department of the Treasury,

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On 15 December 2005, Treasury released a consultation paper seeking comments from interested parties on the implementation of the key findings of the Review.

Public submissions to the consultation paper will be published on the Treasury website.

On 12 September 2003, the Federal Treasurer, the Hon Peter Costello, MP announced the Government's response to the HIH Royal Commission's final report.

In his report, Justice Owen recommended that the Government amend the Insurance Act 1973 to extend prudential regulation to all discretionary insurance-like products — to the extent that it is possible to do so within constitutional limits. Justice Owen also raised some issues associated with direct offshore foreign insurers (DOFIs) but made no specific recommendation.

Under Australia's regulatory framework, consumers of financial services are provided with a high level of protection. All providers of financial services are subject to market conduct and disclosure regulation. In addition, entities involved in the business of taking deposits, providing insurance or acting as a superannuation trustee are also subject to prudential regulation.

The Government considered a review was required to determine whether it is necessary and possible to provide the same level of protection to consumers (and third parties) of products supplied by discretionary mutual funds (DMFs) and DOFIs as is provided to consumers of products supplied by insurers subject to prudential regulation under the provisions of the Insurance Act.

The review considered the role of DMFs and DOFIs in the Australian insurance market and their contribution to overall insurance capacity.

The review took submissions from interested parties and provided a report to Government at the end of January 2004 on options for ensuring appropriate levels of consumer protection.

The Government has accepted the recommendations of the Review and these will be implemented in full, with further consultation during the implementation of these reforms.

The Government has released a paper outlining the key findings of the DMF and DOFI Review.