The Australian Prudential Regulation Authority (APRA) today introduced a revised capital and reporting framework for lenders mortgage insurers (LMIs) that will provide increased protection for policyholders.

The revised prudential standards and new reporting requirements, which follow extensive industry consultation, involve a more risk-sensitive regulatory capital model and a significant increase in minimum regulatory capital requirements.

The definition of acceptable mortgage insurance for authorised deposit-taking institutions (ADIs) claiming capital concessions on certain mortgage-insured loans has also been amended.

APRA Member, Mr Steve Somogyi, said ‘these new requirements will help ensure that valid claims from policyholders are able to be met appropriately if there were to be a pronounced housing market downturn.’

All LMIs and ADIs must comply with the revised prudential standards and new reporting requirements from 1 January 2006. LMIs may apply to APRA for a transition period if they are materially affected. All requests for a transition period must be received and approved by APRA prior to 1 January 2006.

The revised prudential standards and new reporting requirements are located on APRA’s web site at:

AGN 112.1 Risk Weighted On-Balance Sheet Credit Exposures (commences 1 January 2006): http://www.apra.gov.au/Policy/Prudential-Standards-Guidance-Notes-for-ADIs.cfm

New general insurance guidance note, GGN 110.6 Concentration Risk Charge for Lenders Mortgage Insurers (commences 1 January 2006): http://www.apra.gov.au/General/General-Insurance-Prudential-Standards-and-Guidance-Notes.cfm

The new reporting standard, GRS 170.1 Maximum Event Retention and Risk Charge for LMIs: http://www.apra.gov.au/Statistics/General-Insurance-Reporting-Standards.cfm

The new forms and the new instruction guide, GRF 170.1 Maximum Event Retention and Risk Charge for LMIs:http://www.apra.gov.au/statistics/Prudential-Forms.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.