Austbrokers Countrywide is one of Australia’s leading providers of professional indemnity insurance solutions to financial planners, risk insurance and superannuation advisers.

We manage one of the largest portfolio’s across Australia which includes large national corporate entities and small individually owned practices.

ASIC’s Regulatory Guide 126 (RG126) formalises the insurance requirements for Australian Financial Services (AFS) licensees. Below is a brief summary of the current requirements of RG126

Regulatory Guide 126 (RG126)

Authorised Insurers

From 1 July 2008, the insurance must be provided by an insurer regulated by APRA or operating under an exemption under the Insurance Contract Act 1973 (Cth)

Amount of Cover

A minimum of $2 million with one automatic reinstatement and an amount approximately equal to revenue up to $20 million.

Scope of Cover

The policy must indemnify the licensee against liability for loss or damage suffered by retail clients because of breaches of chapter 7 of the Corporation Act by the licensee or its representatives.

For Fraud or dishonesty by directors, employees and other representatives of the licensee

SDR scheme awards

Exclusions

• Policies must not have the effect of excluding
• EDR schemes
• Loss caused by conduct of representatives generally
• Fraud and dishonesty by directors, employees and other representatives
• Claim for misrepresentations about services
• Claims arising from incidents notified to ASIC (e.g. through a breach report)

Persons covered

The policy must cover the acts of the licensee and all of its representatives.

Automatic reinstatements

The policy must have at least one automatic reinstatement.

Excess/Deductibles

The excess/deductible must be at a level that the business can confidently sustained as uninsured costs.

Legal Costs

Legal/defence costs are to be in addition to the minimum limit or the level of cover must be sufficiently high enough to take into account the increased costs.

EDR Scheme awards

The policy must cover EDR scheme awards.

Fraud/Dishonest/Infidelity

The policy must cover fraud/dishonesty/infidelity by directors, employees and other representatives of the licensee.

Approved Product List

The policy must cover items not on an approved product list for representatives who act outside the approved product list in legitimate switching cases where a client is being switched from one fraud or product to another.

Retroactive Cover

The policy must provide retroactive cover to the earlier of;

• The retroactive date specified in the immediately previous PI insurance policy; or
• The commencement date of the first PI insurance policy in the series of continuous policies.

‘Run off’ Cover

ASIC has removed the requirement for AFS licensees to obtain automatic run-off cover. ASIC decided to remove this requirement due to the difficulty in obtaining the cover from the insurance market.

Switching Cover

From 1 January 2010, AFS Licensees are required to obtain switching cover that covers the situation where an AFS licensee moves a client from a product that is not on the approved product list to one that is on the approved product list.

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