The Australian Prudential Regulation Authority (APRA) has announced that as of midnight Sunday 30 June 2002, its new Prudential Standards for general insurance companies will come into effect. All general insurance companies must now comply with these new Standards, which have been developed in conjunction with the industry over the past three years.
"These world-class Standards significantly increase the safety, soundness and sustainability of the Australian financial system", said Mr Graeme Thompson, CEO of APRA. "The bar is now set much higher for insurers, and safety for policyholders is now stronger than it has ever been."
The vast majority of general insurers have been able successfully to meet the new requirements. APRAs reauthorisation process involved a rigorous assessment of each general insurers capital adequacy, business practices and business plans. The reforms include significantly increased capital requirements, stricter corporate governance requirements and far greater emphasis on the role of company actuaries.
The reform requirements include:
- Increased capital requirements - minimum increased from $2m to $5m, with more comprehensive risk-based requirements over and above that;
- Reinsurance management strategy;
- Risk management strategy and processes;
- Obligation to appoint an Approved Actuary.
The GI Reform Act places greater onus on company directors taking responsibility for the protection of policyholders than in the past. "Boards must now sign off on formal risk management plans, take advice from approved actuaries with whistle-blowing responsibilities and be fit and proper persons themselves" said Mr Thompson.
APRA has reauthorised most general insurance companies under the General Insurance Reform Act 2001, and these general insurers will continue to be able to underwrite insurance business in Australia. In addition, APRA imposed formal conditions on some companies, which allow them over the next two years to bring their capital positions into line with APRAs requirements. (Details of companies reauthorised will be made public on 1 July 2002)
APRA has not granted full reauthorisation to a small number of general insurers. These insurers are inadequately capitalised or were otherwise unable to satisfy APRAs reauthorisation criteria. APRA has restrained these general insurers from writing new policies or renewing existing policies. APRA will supervise the orderly run-off of policies these insurers have in force.
Further information on the reforms are available on the APRA website at http://www.apra.gov.au/General/General-Insurance-Reforms.cfm
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0417 528 660 |
