The Australian Prudential Regulation Authority (APRA) is today releasing a package that sets out its draft prudential framework for supervision of general insurance groups.

The package consists of three draft prudential standards and a discussion paper that responds to submissions received following two previous consultation rounds in 2006 and 2007. The package also responds to recommendations 38 and 39 of the HIH Royal Commission. Initial consultation with the general insurance industry on this topic began in May 2005.

The foundation of APRA's approach to the supervision of general insurance groups is that the group as a whole should meet essentially the same minimum capital requirements as apply to individual general insurers. Being part of a wider insurance group can alter the risk profile of an individual insurer through financial and operational inter-relationships with other group members and through decisions and initiatives taken at group level.

APRA Member John Trowbridge said: "In order to protect the interests of policyholders of an authorised insurer within a general insurance group, there is a need for APRA to apply prudential supervision at the group level to ensure individual general insurers within the group remain sound."

Mr Trowbridge added: "While capital requirements are the cornerstone of prudential supervision, other prudential requirements are also vital to ensure policyholder protection. General insurance groups already need to satisfy APRA standards on governance and will also now need to do so for risk management, audit and actuarial reporting and valuation."

"The proposals in this package would enable APRA to supervise consolidated general insurance groups, including those with foreign-based businesses, such that each group would meet prudential requirements equivalent to those currently applying to individual APRA-authorised general insurers."

It is intended that the final prudential standards implementing general insurance group supervision will be released in the third quarter of 2008 and will become effective on 1 January 2009.

The package of draft standards and discussion paper can be found on the APRA website at: http://www.apra.gov.au/General/Proposals-relating-to-GI.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 $3 trillion in assets for 21 million Australian depositors, policyholders and superannuation fund members.

Media and industry inquiries only:
Stuart Snell, Head of Public Affairs
Australian Prudential Regulation Authority
Telephone: 02 9210 3384
Mobile: 0407 250 276

All other inquiries:
APRA Contact Centre 1300 131 060.