NSW ban on insurance covering ECEC financial penalties now in effect

Early childhood education and care providers in New South Wales are being reminded to review their insurance arrangements following the commencement of a ban on policies that cover financial penalties for regulatory non-compliance.

Under section 292A of the Education and Care Services National Law (NSW), individuals and entities are prohibited from holding insurance that covers fines or other financial penalties imposed for breaches of the National Law, National Regulations or NSW Regulations.

The ban commenced on 24 April 2026 and is intended to ensure that individuals, services and providers remain directly accountable for non-compliance and cannot transfer the financial consequences of regulatory breaches to an insurer. 

The prohibition applies to insurance covering financial penalties imposed for breaches of:

• the Education and Care Services National Law
• the Education and Care Services National Regulations
• NSW-specific education and care regulations
• disciplinary actions under the National Law as it applies in NSW.

This means a service cannot take out or continue to hold an insurance policy that indemnifies it, or another person, against fines or other financial penalties arising from non-compliance. 

The ban applies to policies entered into from 24 April 2026, as well as policies established before that date that continue to be held, including renewals. 

The reform does not prohibit all insurance held by providers or service leaders.

Directors’ and officers’ liability insurance, professional indemnity insurance and other forms of cover remain permitted, provided they do not cover financial penalties imposed for breaches of the relevant laws or disciplinary action.

Insurance covering defence costs is also not intended to be captured by the reform. 

The NSW Early Learning Commission notes that section 292A does not prevent a service from choosing to pay a financial penalty from its own funds or financial reserves on behalf of a person who has received the penalty. 

Approved providers should review their insurance documents and speak with their insurer or broker to confirm that their policies comply with section 292A.

The Commission also recommends documenting the steps taken to verify compliance as evidence of due diligence. This may include retaining correspondence with an insurer, broker or adviser confirming that a policy does not provide prohibited cover. 

Where the scope of an existing or proposed policy remains unclear, providers are encouraged to consider their governance arrangements and seek independent legal or financial advice.

The purpose of the ban is to preserve the accountability and deterrent effect of financial penalties.

By preventing fines from being transferred to an insurer, the reform places greater emphasis on effective governance, regulatory oversight and risk-management systems that reduce the likelihood of non-compliance.

For approved providers, boards and persons with management or control, the change reinforces the need to understand both the organisation’s legal obligations and the precise protections and exclusions contained within its insurance arrangements.

The NSW Early Learning Commission’s frequently asked questions provide further guidance on the operation of the ban and the steps providers can take to confirm their policies are compliant. 

Access the Ban on insurance covering financial penalties here.