The Australian Prudential Regulation Authority (APRA) today released a consultation package on its proposals to maintain the prudential framework for life companies, including friendly societies, in the light of amendments being made to the Life Insurance Act 1995 (Life Act).

The Financial Sector Legislation Amendment (Simplifying Regulation and Review) Bill 2007, which is currently before Parliament, implements Government commitments in response to the recommendations of the Taskforce on Reducing Regulatory Burdens on Business, in its Report Rethinking Regulation. The Bill removes several sections of the Life Act.

To ensure the continued operation of the existing prudential framework, APRA proposes to replicate most of the provisions removed from the Life Act in new and amended prudential standards. These include:

• two new prudential standards to ensure that key provisions relating to actuaries, auditors and reinsurance continue to operate;
• the reissue of actuarial standards, which are currently set by the Life Insurance Actuarial Standards Board, as APRA prudential standards; and
• minor amendments relating to governance and ‘fit and proper’ requirements.

APRA Member Mr John Trowbridge said that “APRA is not introducing any new requirements, and life companies will not incur additional costs. These proposals will maintain the current prudential framework while also increasing APRA’s flexibility to adapt its prudential standards to future developments in the life insurance industry.”

APRA is consulting with industry to ensure that the transition to the revised Life Act occurs as smoothly as possible.

APRA is proposing that the new prudential standards will be available in the fourth quarter of 2007 and take effect on 1 January 2008.

The consultation package released today comprises a discussion paper and a series of draft prudential standards and instructions. These are all available on APRA’s website at www.apra.gov.au/policy. Written submissions on the proposals are welcome and should be emailed to LifeStandards@apra.gov.au by 31 August 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