Overview

APRA has finalised amendments to the general insurance (GI) reinsurance framework to improve access to alternative reinsurance arrangements while protecting policyholder interests. Reinsurance plays an important role in the GI industry by enabling insurers to manage risk effectively and meet capital requirements. The reforms ensure the prudential framework remains fit for purpose as market conditions and reinsurance practices evolve.

The review commenced during a period of significant pressure in reinsurance markets, highlighting the importance of cost‑effective reinsurance for effective risk and capital management. While market conditions have since eased, APRA remains focused on modernising the prudential framework to support insurers’ ongoing access to a broad range of reinsurance options through the cycle.

The key changes include targeted amendments to improve access to alternative reinsurance arrangements, alongside measures to enhance efficiency by reducing APRA approval requirements. These reforms are also supported by technical refinements to enhance clarity, consistency and transparency across the GI prudential framework. Together, these changes deliver greater flexibility for insurers through facilitating a broader range of reinsurance options, alongside a more streamlined regulatory approach.

Feedback received

Submissions to APRA’s most recent consultation on this topic indicated broad support for the proposals. The proposals are seen as a positive step to enhance access to reinsurance solutions and reduce regulatory burden. Submissions also identified areas where minor refinements and additional guidance would improve clarity. There was strong support for expanding the role of the Appointed Actuary (AA), and submissions also welcomed the technical refinements, with suggestions for further guidance to support consistent implementation.

The final changes set out in this response paper follow two rounds of consultation. In November 2024, APRA sought feedback on the direction of the review. This was followed by consultation on draft prudential standards, guidance and reporting standards in October 2025, to which APRA received seven submissions. Non-confidential submissions are available on APRA’s website.

Summary of APRA’s response

After considering the feedback received, APRA has concluded that the proposals will facilitate better access to alternative reinsurance solutions while maintaining insurers’ financial resilience. APRA has also made targeted refinements in response to stakeholder feedback, including clarifications to support consistent interpretation and application of the framework.

The reforms are expected to enhance flexibility for insurers by simplifying the capital treatment of alternative reinsurance arrangements, reducing regulatory burden, and improving the overall efficiency of the framework.

Further details on the key themes raised in consultation, and APRA’s response, are set out in the next section, with a summary table of changes in the Attachment.

Next steps

Final prudential standards, guidance and reporting standards, published alongside this paper, will come into effect on 1 January 2027. These include:

Prudential standards

• GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115)
• GPS 116 Capital Adequacy: Insurance Concentration Risk Charge (GPS 116)
• GPS 230 Reinsurance Management (GPS 230)
• CPS 320 Actuarial and Related Matters (CPS 320)

Prudential practice guides

• GPG 116 Insurance Concentration Risk (GPG 116)
• GPG 245 Reinsurance Management Strategy (GPG 245)

Reporting standards

• GRS 115.0 Outstanding Claims Liabilities – Insurance Risk Charge (GRS 115.0)
• GRS 115.0.G Outstanding Claims Liabilities – Insurance Risk Charge (GRS 115.0.G)
• GRS 115.1 Premiums Liabilities – Insurance Risk Charge (GRS 115.1)
• GRS 115.1.G Premiums Liabilities – Insurance Risk Charge (GRS 115.1.G)
• GRS 116.0 Insurance Concentration Risk Charge (GRS 116.0)
• GRS 116.0.G Insurance Concentration Risk Charge (Level 2 Insurance Group) (GRS 116.0.G)

APRA does not expect an insurer to resubmit its Reinsurance Arrangement Statement (ReAS) solely due to the commencement of the new framework. Any changes arising from the reforms are to be reflected in the next scheduled ReAS submission.

Updated reporting forms are planned to be released in the APRA Connect Test environment in September 2026. This will allow entities time to familiarise themselves with the collection prior to the first reporting period ending on or after 1 January 2027. APRA intends to release taxonomy artefacts prior to September to allow entities as much time as possible to manage the necessary reporting changes for these collections.

Glossary

Response to key issues

1. Improving access to alternative reinsurance

Reinstatement requirement

While there was general support for removing the reinstatement requirement for reinsurance arrangements that typically do not have a reinstatement available, several respondents emphasised the importance of maintaining a level playing field between traditional and alternative reinsurance. They noted that differential treatment could potentially drive shifts in market behaviour, including insurers favouring catastrophe bonds to avoid reinstatement requirements. To address this, some respondents called for consistent rules to be applied across all reinsurance arrangements and advocated for prescribing an additional minimum capital requirement where reinstatements are typically unavailable, to avoid differential capital treatment between reinsurance types.

Some submissions also sought guidance on what ‘reinsurance arrangements that typically do not have a reinstatement available’ means in practice, as well as further guidance on the role of the AA in determining this.

APRA’s response

APRA considers the risk of a material shift in market behaviour to be low. Continuing to include reinstatements in reinsurance programmes is generally consistent with insurers’ risk appetites and risk management practices. APRA does not consider the proposed change favours alternative reinsurance over traditional reinsurance, as this view assumes that the absence of a reinstatement would be a material factor in reinsurance decisions. In practice, insurers’ decisions to use alternative reinsurance are driven by broader risk management and commercial considerations rather than by reinstatement requirements alone.

Furthermore, introducing an additional capital requirement for the cost of repurchase for alternative reinsurance would not resolve concerns regarding an uneven playing field. Traditional and alternative reinsurance products have inherent differences, serve distinct purposes, and are therefore treated differently within the prudential framework. Capital requirements are only one element of the overall assessment, with insurers’ risk management practices and other commercial factors also influencing the attractiveness of different arrangements. Introducing an additional capital requirement in these circumstances would therefore not be expected to have a material impact or support APRA’s objective of promoting access to a broader range of reinsurance solutions.

To preserve framework flexibility, APRA does not intend to further prescribe the meaning of ‘reinsurance arrangements that typically do not have a reinstatement available’, as doing so could unintentionally constrain the scope of the framework over time. Instead, guidance has been provided in GPG 116, including clarifying how reinstatements operate across different types of reinsurance and the circumstances in which a reinstatement may, or may not, be expected. This includes recognition that catastrophe bonds are generally considered arrangements where a reinstatement is not typically available.

APRA will proceed with its proposed approach that a reinstatement will not be required where such arrangements are typically unavailable, such as catastrophe bonds. In these cases, insurers are expected to determine how they will manage the risk of not having a reinstatement, including considering how cover would be reinstated where relevant, and document that approach in the Reinsurance Management Strategy (ReMS).

APRA notes that for reinsurance arrangements that typically do not include a reinstatement, reinstatement costs are not required in the Natural Perils Vertical Requirement (NP VR). However, for the Natural Perils Horizontal Requirement (NP HR), reinstatement costs must be included where the insurer assumes that the cover will be reinstated to provide protection against future events.

All perils requirement

Most submissions broadly agreed with APRA’s proposal to direct insurers to use the existing net whole-of-portfolio approach in GPS 116. This does not introduce a new requirement, but redirects insurers to apply an approach already available under the framework. Under this method, insurers are required to assess reinsurance arrangements on a net whole-of-portfolio basis where coverage is not provided across all perils and regions. Submissions noted this approach would allow APRA to retain the existing level of protection at a 1 in 200 year event on an all perils basis, while providing greater flexibility in how insurers structure protection.

APRA’s response

APRA considers it appropriate to retain the current proposal, which requires the net whole‑of‑portfolio approach to be mandatory for reinsurance that does not provide whole‑of‑portfolio coverage, such as single‑peril reinsurance. The change is expected to support the recognition of capital benefits for arrangements with incomplete coverage, while enabling insurers to access alternative single‑peril or regional reinsurance aligned with their risk profile.

2. Enhancing efficiency by reducing APRA approval requirements

There was strong support for the proposal to expand the role of the AA to determine the capital treatment of certain reinsurance arrangements. Respondents noted that this would reduce regulatory burden by limiting referrals to APRA and simplifying access to alternative reinsurance arrangements.

Some submissions called for an expansion of the AA’s role beyond this proposal, including allowing the AA to assess a broader range, or all, reinsurance arrangements, to deliver greater efficiency benefits. One respondent also noted that clearer guidance on the respective roles of APRA and the AA would be beneficial and suggested establishing explicit materiality thresholds to set clearer expectations for insurers.

APRA’s response

In light of support from respondents, APRA will proceed with the proposal to expand the role of the AA to assess the capital implications of certain reinsurance arrangements, with APRA approval required only for more complex arrangements, where these arrangements are material. APRA considers this approach strikes an appropriate balance between improving efficiency and maintaining prudent oversight. APRA does not intend to extend the AA’s role beyond the current proposal. This approach recognises that reinsurance arrangements can vary significantly in complexity and risk, with more complex adjustments benefiting from continued APRA involvement to support prudent and consistent outcomes. It also reflects differences across insurers in practices and capabilities, ensuring that such arrangements continue to receive an appropriate level of regulatory oversight.

APRA does not propose to define a threshold for ‘material’ arrangements, recognising that what is considered material will vary across insurers depending on the nature, scale and complexity of their business operations. The expansion of the AA’s role is intended to support the exercise of professional judgement and flexibility in assessing materiality, and further defining what arrangements are deemed as material would risk unduly constraining this judgement. In making these assessments, insurers and AAs may draw on guidance issued by the Actuaries Institute1, as a reference point.

In response to feedback, the table below provides illustrative guidance on how the framework applies in practice, including examples of circumstances where the AA will determine capital treatment and where APRA approval is required.

3. Fine-tuning the framework

Most submissions welcomed the proposed technical refinements to further fine‑tune the GI reinsurance framework. Some respondents also sought additional guidance on non‑modelled risk requirements, including examples commonly encountered in GI portfolios, approaches to calibrating appropriate allowances, and how these allowances would be applied under GPS 116.

APRA’s response

In response to feedback seeking further detail on non-modelled risk, APRA has updated GPS 116 to clarify that allowances for non‑modelled risk should capture factors that increase catastrophe losses, including the impact of demand surge, an allowance for underinsurance, and policy coverage features that increase the quantum of loss. APRA considers this clarification provides sufficient support to insurers and does not propose to issue additional guidance.

APRA will proceed with the proposed technical refinements. The final changes are summarised in the Attachment to this paper.

4. Reporting modifications

As most submissions were supportive of the proposed approach, APRA will be proceeding with changes to the reporting standards. These updates are intended to maintain alignment between prudential and reporting standards, including new and revised data items that will capture adjustments advised by the AA and those approved by APRA.

APRA will also proceed with the proposed confidentiality classifications, noting that no feedback was received. The new data items in GRS 115.0, GRS 115.0.G, GRS 115.1 and GRS 115.1.G will be classified as non‑confidential, noting that these items will not be included in APRA’s statistical publications without prior public consultation. The new data items in GRS 116.0 and GRS 116.0.G will be classified as confidential, in line with existing confidentiality determinations for reporting standards.

5. Additional consultation suggestions

Additional feedback was provided on potential refinements to the GI reinsurance framework. Issues raised included matters relating to the NP HR, capital treatment of offshore reinsurers, clarification of the inception date and two‑month rule, and aspects of reinsurance contract enforceability relating to the seat of arbitration for disputes and payment arrangements.

One submission suggested introducing an eight‑week grace period after the balance date to allow collateral for certain reinsurance recoveries to be put in place, noting this would reduce compliance burden and avoid technical breaches without materially increasing risk. APRA will consult on this suggestion as part of its 2026 minor prudential framework updates process.

APRA has considered these suggestions in light of the review’s objectives and timelines. On balance, no further changes are proposed at this stage.

Attachment – Summary of final revisions

This table compares APRA’s October 2025 consultation proposals with the final position. APRA has proceeded with the proposals as consulted on, with minor clarifications set out below.

1. Improving access to alternative reinsurance

2. Enhancing efficiency by minimising APRA approval requirements

3. Fine-tuning the framework

4. Reporting modifications