TressCox helped the Real Estate Institute (REI) of NSW and its board to set up RealCover, the first “captive” insurer for the real estate industry in Australia.
Registered in NZ, RealCover recently began underwriting risk for real estate agents in NSW, following its launch in March by Aon Risk Services.
The move comes in the lead up to the commencement of mandatory professional indemnity insurance for real estate agents in NSW from 1 September.
TressCox initially began advising the REI and later its board of directors 18 months ago on the establishment of the offshore captive insurer.
A key issue was the “business challenge” of an offshore insurer operating as an unauthorised insurer in Australia, especially given the recent financial services reforms.
The firm said structuring corporate arrangements to meet the regulatory requirements for insurance policies to be offered through an authorised foreign insurance broker was one of the more complex tasks.
This was particularly critical “in light of the new financial services licensing regime and considering Treasury proposals concerning the regulation of direct offshore foreign insurers”, the firm stated.
It said RealCover was registered in NZ because this significantly reduced set up costs. “In particular, the minimum capital and paid up capital requirements [of] NZ regulatory authorities are substantially less than [required by] Australian authorities.”
TressCox said real estate agents could now obtain insurance cover through a reputable onshore broker where previously, due to “market failure”, some real estate agents were not able to obtain affordable insurance.
Ron Heinrich, partner and head of the law firm’s financial services group, and Michael Bracken, partner and head of the corporate group, were the key legal advisers involved in the deal.