The Australian Prudential Regulation Authority (APRA) today issued a package that will establish the prudential framework for the supervision of general insurance groups domiciled in Australia.
The package consists of three new prudential standards, one revised prudential standard and a response paper that addresses submissions received from the general insurance industry in relation to a consultation package released in April 2008. The standards are the result of more than three rounds of consultation with industry, over a three-year period, on general insurance group supervision.
The requirements of these standards will apply to all general insurance groups that have either an APRA-authorised general insurer or an APRA-authorised non-operating holding company (NOHC) as the parent entity of the group.
According to APRA Executive Member John Trowbridge: ‘With these new standards, APRA is aiming to ensure that insurance groups are financially sound and that group interrelationships do not compromise the financial soundness of individual APRA-authorised insurers within the group.’
APRA’s approach to general insurance group supervision is to treat, in principle, the insurance group as one economic entity and apply requirements to the group similar to those applying to individual APRA-authorised general insurers, in relation to:
The governance and the fitness and propriety requirements already apply to general insurance groups, and so precede these new standards.
The prudential standards will become effective on 31 March 2009. Among other things, they will enable APRA to implement recommendations 38 and 39 of the HIH Royal Commission in relation to general insurers that operate as part of a corporate group. The new standards will also enable APRA to meet Insurance Core Principle 17 of the International Association of Insurance Supervisors (IAIS), which requires insurance supervisors to supervise general insurers on a group basis and a solo basis.
The standards and the response paper can be viewed on APRA’s website at: www.apra.gov.au/Policy/Supervision-GI-Groups-December-2008.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 companies, 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:
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.
