The Australian Prudential Regulation Authority (APRA) today issued a discussion paper, draft prudential standards and guidance notes outlining a proposed strengthening of the prudential supervision of general insurance in the areas of risk and financial management.

The consultation package outlines proposals to:

• clarify and strengthen existing requirements in business planning, risk management, reinsurance management and outsourcing;
  
  
• ensure insurers adequately document reinsurance contracts;
  
  
• introduce strict requirements for the approval of limited risk transfer arrangements;
  
  
• require Approved Actuaries to complete an annual Financial Condition Report on each insurer and have a peer review undertaken of actuarial valuations of insurance liabilities; and
  
  
• require CEO and CFO attestation of the financial information provided to APRA, the Approved Auditor and the Approved Actuary.
  

APRA Member Mr Steve Somogyi said that the proposed reforms provide clearer guidance to enable many members of the insurance industry to lift standards to a level regarded as good practice.

"These proposals will move the insurance industry toward increased accountability for their business practices and implement a number of the recommendations of the HIH Royal Commission. One of the new requirements is for Approved Actuaries to produce an annual Financial Condition Report, as has been the practice in the life insurance industry for many years."

Mr Somogyi said that the reforms will provide for contract certainty of reinsurance arrangements and introduce stricter rules for limited risk transfer arrangements.

"The proposed changes also ensure long-term capital and risk planning and clarify professional advisers obligations and reporting requirements," he said.

The proposals follow comments received on APRA's discussion paper, Prudential Supervision of General Insurance Stage 2 Reforms, issued in November 2003.

Comments on the draft standards, guidance note and discussion paper Prudential Supervision of General Insurance Stage 2 Reforms - Risk and Financial Management released today are invited by 5 August 2005.

APRA's discussion paper, draft prudential standards and guidance notes are available on APRA's web site at: http://www.apra.gov.au/Policy/Draft-Prudential-Standards-General-Insurance-Risk-and-financial-management.cfm


The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.APRA is funded largely by the industries that it supervises. It was established on 1 July 1998.APRA currently supervises institutions holding approximately $2.0 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.