Some Australian financial services licence applicants are facing delays in securing professional indemnity (PI) insurance cover due to the financial services royal commission, putting in jeopardy their applications with ASIC, according to Fold Legal.
Fold Legal head of licensing Sónia Cruz said the insurance market had hardened following the royal commission and this had made securing PI cover more difficult, in some cases leaving some licence applicants without cover.
“Without cover, licence applicants can’t satisfy ASIC they have met their statutory requirements, so ASIC can’t issue their licence. This is resulting in substantive delays for some licence applicants,” Cruz said.
To counter these problems, she said potential licensees should start looking for insurance early and even appoint a broker that specialised in PI insurance.
“As soon as you decide to apply for a licence, and before you even lodge your licence application, you should start looking for PI insurance,” she added.
She pointed out any broker should be familiar with the compensation and insurance arrangements required by ASIC under its regulations and for applicants to be aware of their insurance requirements.
“Know what PI insurance you need and what it must cover. Not all services require PI insurance. Some covers are harder to obtain than others, so if you don’t need them to comply with the law, it may be worth not insuring that risk in the short term,” she noted.
She also recommended applicants should also describe their business and the services it offers in their application as “this will make it clear to ASIC what you need to insure and what you don’t”.
