Developing this framework has been a major project from early in APRAs life and has meant a thorough overhaul of the outdated regime that has been in place since 1973.

The final round of industry consultation on proposed new prudential standards is now under way and ends on 30 June. In view of the extensive consultation that has already occurred APRA expects to issue them in final form soon after that.

Mr Thompson said: These reforms will move Australias system for supervising general insurers to the forefront of international best practice.

APRAs new standards will introduce:

• more consistent, rigorous and reliable valuation of insurance liabilities, supported by expert actuarial advice;
• capital adequacy requirements that are both tougher and more sensitive to each general insurers risk profile;
• reinsurance arrangements that are suitable to the scale, complexity and business mix of each company;
• more demanding standards for corporate governance, ensuring that company Boards are well equipped to fulfil their esponsibilities to policyholders and other parties; and
• obligations on external auditors and valuation actuaries to report to APRA on company problems.

For the industry as a whole, required capital which is one important part of any supervisory system will increase by around 50 per cent. Most insurers will be able to meet the new higher requirements when they come into effect in July 2002 without having to raise additional capital. However, a number of insurers mostly very small will not meet the new minimum requirements immediately. APRA will determine a timetable for these companies to come up to the new level by 1 July 2004.

A high-level description of the new framework and the full set of draft prudential standards were issued by APRA on 29 March 2001, and can be found at:

http://www.apra.gov.au/policy/general_insurance_discussion_papers/

For further information contact:

Gloria Peterson
Public Affairs Manager
02 9210 3385 or 0419 250 286