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APRA releases further package on review of capital standards for insurers

Thursday 31 May 2012


The Australian Prudential Regulation Authority (APRA) has today released a set of prudential standards in final form, a set of draft prudential standards and a response paper as part of its review of capital standards for general and life insurers.

The aims of APRA’s review include improving the risk-sensitivity of the capital standards for insurers and achieving better alignment of these standards across APRA-regulated industries.

APRA commenced its review in 2010 and has consulted extensively with industry and stakeholders since then. The paper released today outlines APRA’s response to the main issues raised in submissions on APRA’s December 2011 consultation package and invites comment on the few remaining areas to be finalised. Accompanying the response paper are:

  • final versions of most of the capital standards released in December 2011;
  • draft prudential standards setting out APRA’s proposals for the composition of the capital base (i.e. Prudential Standard GPS 112 Capital Adequacy: Measurement of Capital and an updated draft of Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital);
  • draft prudential standards with amendments that are, in the main, consequential to the revised capital framework, as well as a small number of other proposed amendments to enhance readability and address minor prudential matters; and
  • updated versions of two draft prudential standards — Prudential Standard GPS 001 Definitions and Prudential Standard LPS 001 Definitions.

APRA Member Ian Laughlin said the review of the capital standards for insurers was now moving to the implementation phase. ‘Over the rest of this year, APRA will engage with industry on the remaining draft prudential standards and the proposed amendments to the reporting framework.’

‘Insurers should now be focused on implementing the revised capital framework. This includes engagement of their senior management and Board in the internal capital adequacy assessment process and, if required, discussions with APRA on the need for transition arrangements,’ he said.

APRA invites comments on proposals in the response paper and the draft prudential standards by 27 July 2012. The package is available on APRA’s website.

APRA expects to release draft reporting forms and instructions in June 2012. The remaining final prudential standards and draft prudential practice guides are expected to be released by October 2012. The final reporting forms and instructions are expected to be released in October 2012. The revised capital framework will take effect from 1 January 2013, with reporting commencing from the first quarter in 2013.

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.