The purpose of the proposed Committee is to provide greater assurance that branches will comply with the prudential requirements placed upon entities registered to conduct life insurance business in Australia. The proposal forms part of the amendments to the Life Insurance Act 1995 (the Life Act) resulting from the Free Trade Agreement negotiated this year between Australia and the United States.

Key points contained in the proposed standard include:

• the Board of Directors (the Board) of a foreign life company with a registered Australian branch must delegate sufficient powers of management to the Committee to enable it to ensure the branch complies with the Life Act; and
  
  
• ultimate responsibility for ensuring compliance with Australia’s prudential regime remains with the Board. To this end, the Board must:
  
  
  • have the power to appoint and remove the members of the Committee at its discretion, subject to certain composition and residency requirements as outlined in the standard;
    
    
  • ensure the delegation of managerial powers is not irrevocable and does not exclude, if necessary, the Board from exercising these powers; and
    
    
  • establish adequate procedures for monitoring and supervising the operations of the Committee, as well as assessing its performance.

“APRA’s guiding principle in the proposed Standard is to ensure that the Australian policyholders of life branches operating in Australia can enjoy the same degree of financial security as the policyholders of Australian incorporated life companies,” said Mr Somogyi.

APRA will consider extending this proposal to the branches of foreign general insurers in due course.

Comment on the draft standard is invited by 28 February 2005. A copy of the standard and Discussion Paper is available on the APRA website at: http://www.apra.gov.au/policy/Draft-Prudential-Standard-for-Eligible-Foreign-Life-Insurance-Companies-Compliance-Committee.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.