The Australian Prudential Regulation Authority (APRA) today released final prudential standards and guidance on risk management and business continuity management for the life insurance industry, including friendly societies.

The standards, developed in consultation with the industry, provide a set of principles‑based requirements for risk management and business continuity management. Institutions have the flexibility to develop their own approaches to meet the requirements in order to best suit their particular circumstances.

The package contains:

• Prudential Standard on risk management (LPS 220);
• Prudential Practice Guides on:
• • risk management;
  • 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;

• Prudential Standard (LPS 232) and Prudential Practice Guide on business continuity management.

APRA Member Mr John Trowbridge said there was acceptance from industry for the introduction of the prudential standards and practice guides, as sound risk management practices benefit all stakeholders and help maintain public confidence.

“Currently, there is no explicit prudential standard on risk management for life companies,” he said. “However, many of the requirements in the prudential standards are already part of the practices of prudently run life insurance organisations, including friendly societies. This was reflected in many of submissions received during the consultation process”.

The new prudential standards also replace seven existing friendly society standards, including a standard on risk management.

The two new prudential standards come into effect from 1 January 2008, instead of 1 July 2007 as previously proposed. The extended implementation date will allow life companies to meet the requirements of the standard in an orderly way, without unnecessary cost. Individual life companies can approach APRA to seek additional transition arrangements if necessary.

These standards harmonise APRA’s approach to risk management across general insurers, banks, superannuation funds and life companies. They are available at www.apra.gov.au/Life/Prudential-Standards.cfm and www.apra.gov.au/Life/Life-Insurance-PPGs.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 $2.5 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.

Media and industry inquiries only:
Andrew McCutcheon, Public Affairs Manager
Australian Prudential Regulation Authority
Telephone: 02 9210 3143
Mobile: 0417 528 660

All other inquiries:
APRA Contact Centre 1300 131 060