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APRA releases consultation package on a reinsurance counterparty data collection for general insurers

Friday 28 June 2013


The Australian Prudential Regulation Authority (APRA) has today released for consultation a discussion paper outlining its proposal to collect reinsurance counterparty data from general insurers and Level 2 insurance groups. The discussion paper is accompanied by four draft reporting forms and instructions.

The discussion paper proposes the collection of specific data items to assess the impact of a downgrade in a reinsurer’s credit rating on a general insurer’s prescribed capital amount coverage, based on current reinsurance recoverables. The proposal also requires general insurers to undertake a forward-looking reinsurance exposure analysis in order to assess the impact of the failure of a material reinsurer on the prescribed capital amount coverage.

This proposal was previously released for consultation in June 2012 as part of APRA’s review of capital standards for insurers and takes into account feedback from that consultation, where appropriate.

APRA member Ian Laughlin said reinsurance can be a significant source of counterparty risk for general insurers, particularly after the occurrence of a single catastrophe event or series of events over a period of time.

‘This proposal is an important step to enhance APRA’s understanding of the general insurance industry’s exposure to individual reinsurance counterparties and the impact that a credit rating downgrade or failure of a reinsurance counterparty can have on the prescribed capital amount coverage of a general insurer or Level 2 insurance group,’ Mr Laughlin said.

APRA invites comments on the proposals in the discussion paper and the draft reporting forms and instructions by 14 August 2013. A response paper with a final package of reporting standards and an amended prudential standard are due to be released by APRA in late 2013. The first reporting forms will be due to APRA with the annual returns submitted by insurers that have a financial year-end of 31 December 2013.

The discussion paper and the four draft reporting forms and instructions can be found on the APRA website.

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, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6 trillion in assets for Australian depositors, policyholders and superannuation fund members.