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We confirm that Asia Mideast Insurance and Reinsurance Pty Ltd (AMIR) has been granted a licence variation with a new authorization to issue, and provide general advice on, miscellaneous financial facility – miscellaneous risk products limited to business risk products to retail and wholesale clients. This will allow AMIR to offer discretionary risk products in respect of business risks, including (but not limited to) risks relating to physical damage, business interruption, public liability, and professional indemnity. There is no limit on the size of the risk for which AMIR may offer discretionary risk products. AMIR proposes to offer discretionary cover under the registered business name “Australian Business Shield”.
A discretionary risk product is a product which allows the product holder (the client) to make a claim for assistance in the event that certain events happen and they suffer certain loss. The client has the right to have their claim for assistance heard, and the issuer (in this case, AMIR) will (if the claim for assistance is withing the terms and conditions of the product) make a decision whether to exercise its discretion for the benefit of the client or not. If the discretion is exercised, AMIR will pay the client an amount equal to all or part of the financial loss suffered by the client up to the maximum limit of indemnity. The product issuer generally undertakes to exercise its discretion in good faith.
A discretionary risk product is broadly comparable to an insurance policy, and the product issuer of a discretionary risk product (i.e. AMIR) is the risk carrier under a discretionary contract the way the insurer is the risk carrier under an insurance contract.
The key difference between a discretionary risk product and an insurance contract is the discretionary nature of the payments it makes. At not time is the risk carrier under a discretionary risk product compelled to make a payment on the happening of certain circumstances, as is an insurer. A risk carrier under a discretionary risk product at all times has the right to refuse financial assistance to a purchaser who makes a claim for assistance. Therefore, AMIR does not need to be authorised under the Insurance Act 1973 and will not be in breach of that Act by offering the discretionary risk product.
As the risk carrier under a discretionary risk product, AMIR is lawfully able to reinsure the risks and liabilities it assumes under the discretionary risk product (although there is no obligation on AMIR to do so). AMIR anticipates reinsuring 90% of the risk retaining 10% of the risk. AMIR’s liabilities under the discretionary risk product can be reinsured with any insurer or reinsurer authorised under the Insurance Act 1973 or who are otherwise exempt from the requirements of that Act.