Following the Government’s announcement on 3 May 2007 'Enhancing the Integrity of Insurance in Australia',the Australian Prudential Regulation Authority (APRA) today issued a discussion paper on proposed refinements to the general insurance prudential framework. 

The Government's announcement related to direct offshore foreign insurers (DOFIs) and discretionary mutual funds (DMFs).  It foreshadowed amendments to the Insurance Act 1973 that would require DOFIs wishing to continue operating in the Australian market to be authorised by APRA. The Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 was introduced into Parliament on 21 June 2007.

APRA Member John Trowbridge said the proposed refinements to the prudential framework will have some effect not only on DOFIs that wish to become APRA-authorised but also on all APRA-authorised general insurers.

"The proposals recognise five different categories of insurer, based on their risk profiles, while maintaining adequate protection for policyholders," he said.

The five categories of insurer are locally incorporated insurers, wholly owned subsidiaries of local or foreign insurers, foreign insurers operating as foreign branches, association captives, and sole parent captives.

The Government intends that offshore foreign reinsurers will not be required to be authorised in Australia.

APRA's discussion paper does not address the proposed exemptions from prudential regulation foreshadowed in the Government's announcement. The Treasury is developing options for such exemptions and intends to issue a separate consultation paper on this topic.

APRA invites interested parties, including local and foreign insurers, insurance agents and brokers, reinsurers and buyers of insurance, to comment on the proposed refinements to the prudential framework that are intended to apply from 1 July 2008. Written submissions should be forwarded to GIRFPF@apra.gov.au by 11 September 2007.

The discussion paper can be viewed on APRA's website at www.apra.gov.au/General/Proposals-relating-to-GI.cfm.

DMFs will not need to be authorised but they will be required to supply data regularly to APRA. APRA's proposals on data collection from DMFs will be addressed in a separate discussion paper to be released later in 2007.

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