The Australian Prudential Regulation Authority (APRA) today released a package of new and amended prudential standards, including actuarial standards, for life companies (including friendly societies).
The changes will come into effect on 1 January 2008. They result mainly from the Government’s recent amendments to the Life Insurance Act 1995 (Life Act) made under the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007 (SRR Act).
In general, the new and amended prudential standards maintain the operation of APRA’s prudential framework by reproducing sections from the Life Act that are better placed in prudential standards. The amended legislation also transfers responsibility for actuarial standards from the Life Insurance Actuarial Standards Board (LIASB) to APRA. These standards are being reissued as APRA prudential standards.
APRA Member Mr John Trowbridge said: “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.”
Two new standards Prudential Standard LPS 230 Reinsurance (LPS 230) and Prudential Standard LPS 310 Audit and Actuarial (LPS 310) will ensure that key provisions relating to actuaries, auditors and reinsurance continue to operate. In particular:
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LPS 230 will incorporate and replace prudential rules relating to the reporting of reinsurance arrangements (PR 23) and reinsurance contracts requiring approval (PR 24);
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under the new LPS 310, APRA will no longer approve auditors as this requirement was removed from the Life Act; and
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the criteria for the appointment of auditors and actuaries under LPS 310 will now be aligned with APRA’s ‘fit and proper’ criteria.
By introducing these standards, APRA is also able to revoke two prudential standards for friendly societies relating to actuarial advice (PS1) and approved benefit fund requirements (PS2); these requirements have been incorporated into LPS 310.
APRA is making minor changes to Prudential Standard LPS 510 Governance (LPS 510) and Prudential Standard LPS 520 Fit and Proper (LPS 520) to re-align references to the revised Life Act:
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the revised LPS 510 is now consistent with the corresponding general insurance governance standard requiring, for example, that members of the Board Audit Committee be directors of the company and that the Board has an explicit Board renewal policy; and
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the revised LPS 520 requires that an Appointed Actuary be a Fellow or Accredited Member of the Institute of Actuaries of Australia.
LPS 510 has also been amended in response to the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations, as outlined in a separate media release today.
The new, amended and reissued prudential standards, as well as a summary of the changes, are available on APRA’s website at www.apra.gov.au/Life/Prudential-Standards.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 $3 trillion in assets for 21 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.
