The Australian Prudential Regulation Authority (APRA) has today released a consultation package on proposals to enhance the prudential framework for life insurance companies.
Legislation to give APRA the power to authorise non-operating holding companies (NOHCs) of life insurance companies is currently before Parliament. If the legislation is passed, APRA will have power to authorise NOHCs of life insurance companies and apply to them the same governance and fit and proper standards that currently apply to authorised NOHCs of authorised deposit-taking institutions (ADIs) and general insurers.
The consultation package also contains proposed amendments to the audit and actuarial requirements for life companies. These amendments clarify APRA’s requirements and align them more closely with those for ADIs and general insurers.
The package, which contains a discussion paper and four draft prudential standards, seeks comments on proposed changes to:
- draft Prudential Standard LPS 510 Governance (LPS 510);
- draft Prudential Standard LPS 520 Fit and Proper (LPS 520);
- draft Prudential Standard LPS 310 Audit and Actuarial Requirements (LPS 310); and
- draft Prudential Standard LPS 320 Actuarial and Related Matters (LPS 320).
The package also outlines some minor consequential amendments to the life insurance reporting standards.
The proposed changes to LPS 510 and LPS 520 are in response to the Financial Sector Legislation Amendment (Enhancing Supervision and Enforcement) Bill 2009 (NOHC Bill), introduced into Parliament on19 March 2009. The Bill proposes to amend the Life Insurance Act 1995 (Life Act) to bring NOHCs of life companies, once authorised, under the prudential supervision of APRA, including the power to issue prudential standards in relation to NOHCs.
APRA Executive Member John Trowbridge said: ‘These changes will better protect life insurance policyholders from risks that may exist in related companies, by ensuring that authorised NOHCs of life companies have adequate governance procedures and that persons in responsible positions are fit and proper.’
The original LPS 310 was created as an interim measure when the Life Insurance Act 1995 (Life Act) was amended by the Financial Sector Legislative Amendment (Simplifying Regulation and Review) Act 2007. In the interests of harmonisation, APRA now proposes to align this standard, where appropriate, to the comparable standards for ADIs and general insurers.
The actuarial requirements that were contained in the original LPS 310 have been put into a separate standard, draft LPS 320.
APRA welcomes submissions on these proposals, published via the APRA website, before 30 June 2009.