The Australian Prudential Regulation Authority (APRA) today released for consultation a package of draft prudential standards and guidance for the life insurance industry, including friendly societies.
The package aims to establish APRA's minimum expectations for risk management and business continuity in the life industry and to bring a number of prudential requirements for life companies and friendly societies into line with other APRA-regulated industries.
The package comprises:
- a discussion paper;
- draft prudential standard and prudential practice guide on risk management;
- draft prudential practice guides on:
- asset and liability management;
- conflicts of interest under Section 48 of the Life Act (duties of directors to policyholders);
- operational risk; and
- insurance risk and reinsurance management.
- a draft prudential standard and prudential practice guide on business continuity management.
The prudential standards provide a set of principles-based requirements for risk management and business continuity management which are harmonised, where appropriate, with requirements applicable in other APRA-regulated industries.
APRA Member Mr John Trowbridge said that many of the requirements in the draft prudential standards will already be part of the practices of prudently run life insurance organisations.
"The draft prudential standards will provide clarity to life companies about APRA's minimum expectations for risk management and business continuity management and promote the continuing soundness of the life insurance industry. Sound risk management practices benefit all stakeholders and help maintain public confidence in the industry."
Mr Trowbridge added: "The proposals are in line with APRA’s aim of moving towards consistency of the principles underpinning the prudential frameworks of all APRA-regulated industries. While differences in detail are necessary in recognition of the differing structures of the various industries, ordinarily principles should be consistent so that like risks are regulated in like manner."
By being principles-based, the draft prudential standards will enable institutions to develop their own approaches to best suit their particular businesses. APRA expects the Boards of Directors of life companies to ensure that risks are well managed, reflecting the Board's primary responsibility for risk management.
Comments on the discussion paper, draft standards and draft prudential practice guides are invited by 31 December 2006. The discussion paper, draft prudential standards and draft prudential practice guide are available on APRA's 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 $2.5 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
