The Australian Prudential Regulation Authority (APRA) has commenced a consultation to update the insurance capital and reporting frameworks in recognition of the implementation of Australian Accounting Standards Board 17 Insurance Contracts (AASB 17).
In the discussion paper released today, APRA outlined plans to align its capital and reporting frameworks for life, general and private health insurance with AASB 17 where appropriate.
APRA is also updating the Life and General Insurance Capital (LAGIC) framework, given it has not been substantively reviewed since it was implemented in 2013. The proposals are not expected to significantly change minimum capital requirements or materially impact premiums.
APRA Executive Board Member Geoff Summerhayes said the adjustments were necessary to maintain alignment between the regulatory framework and the new accounting standards.
“APRA’s current capital and reporting frameworks have close linkages with the existing accounting standards,” Mr Summerhayes said.
“A failure to update the frameworks in a timely manner would create a divergence between the new accounting standard and APRA’s frameworks, resulting in insurers needing to maintain dual valuation, actuarial, accounting and reporting systems.
“This would lead to significant regulatory burden with potential for those costs to be passed on to policyholders. Industry has also consistently expressed its desire for early direction from APRA on how the capital and reporting frameworks are likely to change as a result of AASB 17.”
The consultation on the discussion paper will close on 31 March 2021, with APRA expected to release updated capital and reporting standards in late-2021 for further consultation.
The final APRA capital and reporting standards will become effective from 1 July 2023.
The discussion paper is available on the APRA website at: Integrating AASB 17 into the capital and reporting frameworks for insurers and updates to the LAGIC framework.
Information regarding the regulatory responsibilities and approach of the Australian Securities and Investments Commission (ASIC) to AASB 17 implementation is available at: