The Australian Prudential Regulation Authority (APRA) has released an Information Paper on 'Trustee Liability Insurance' to provide updated guidance to superannuation trustees when obtaining liability insurance.

The paper contains the findings of a survey conducted in 2005 with insurance brokers on the availability of professional indemnity insurance in the marketplace and the level of coverage bought by trustees. The aim of the survey was to help APRA assess the adequacy of professional indemnity insurance cover for Registrable Superannuation Entity (RSE) licensees. RSE licensees are trustees of APRA regulated superannuation funds.

The paper, which replaces information released in 2002 following an earlier survey, finds that the availability of trustee liability insurance is adequate, with premiums trending downwards following a period of high premiums resulting from the collapse of HIH Insurance Ltd.

The Paper also outlines APRA's expectations for RSE licensees to ensure adequate insurance arrangements are in place covering the trustee and fund operations.

APRA Deputy Chairman Ross Jones said that determining the level of insurance cover is an RSE licensee's responsibility. APRA does not advise an RSE licensee how much insurance it must hold but APRA will take insurance into account when assessing the RSE licensee's resources.

"It is important that a trustee understands the risks involved in its operations and has appropriate financial resources in order to meet the adequacy of resources operating standard imposed under the Superannuation Industry (Supervision) Act 1993." Mr Jones said.

"In APRA's view, the level and terms of insurance cover which an RSE licensee has in place should reflect the nature, scale and complexity of the licensee's operations. Licensees are expected to be able to demonstrate that the level and terms of insurance cover are prudent and reasonable to meet their obligations and to ensure they are acting in the best interests of members."

The Information Paper is located on the APRA website.

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 $2.2 trillion in assets for 20 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