The Australian Prudential Regulation Authority (APRA) is calling for feedback on a package designed to address concerns regarding the increased use of offshore reinsurers by life insurers.
Deputy Chair of APRA, Helen Rowell said the concerns were particularly heightened in relation to the group risk market, which plays an important role in Australia’s superannuation system.
Mrs Rowell said changes to the Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge were necessary for APRA to effectively supervise the life insurance market and ensure policyholders were adequately protected.
“The recent growth in life insurers placing business with offshore reinsurers has been a prudential concern, as APRA does not have regulatory authority over these reinsurers,” Mrs Rowell said.
“This has limited our ability to maintain appropriate oversight of the financial safety and resilience of the market,” she said.
“The proposed revisions to the prudential standards for life insurers are necessary to address the potential risks to policyholders from growing use of offshore reinsurance.”
Mrs Rowell said APRA’s Draft Standard also proposed changes that would provide greater clarity on regulatory requirements; facilitate the use of risk mitigation techniques; and minimise the regulatory burden associated with bespoke amendments for individual entities.
The Deputy Chair said stakeholders could have a say on the proposed changes before 25 June and the final Standard was expected to be released by the end of the year.
APRA’s 15-page Draft Standard can be accessed at this PS News link and its 24-page Response Paper, including information on how the have a say, can be accessed at this PS News link.
