Australia Enhances Rules Governing Life Insurance Companies
The Australian Prudential Regulation Authority (APRA) has released final prudential standards on enhancements to the prudential framework for life insurance companies.
Legislation was passed in 2009 that gave APRA power to regulate non-operating holding companies (NOHCs) of life insurance companies, including the power to determine prudential standards for life NOHCs. APRA will apply to these NOHCs the same governance and fit and proper standards that currently apply to NOHCs of authorised deposit-taking institutions (ADIs) and general insurers.
APRA is also making some limited amendments to the audit and actuarial requirements for life insurance companies. These amendments clarify APRA's requirements and align them more closely with those for ADIs and general insurers.
The package released today includes a response paper to submissions received on APRA's draft proposals of May 2009 as well as the following revised prudential standards:
- Prudential Standard LPS 510 Governance (LPS 510);
- Prudential Standard LPS 520 Fit and Proper (LPS 520);
- Prudential Standard LPS 310 Audit and Related Matters (LPS 310); and
- Prudential Standard LPS 320 Actuarial and Related Matters (LPS 320).
The response paper discusses the main issues raised in the submissions and APRA's response to these issues. A number of clarifications were sought in the submissions, and in some instances APRA has amended its proposals to address matters raised.
APRA Executive Member John Trowbridge said these enhancements to the prudential framework for life insurance companies are important for the protection of policyholders.
"The legislation enabling APRA to authorise NOHCs of life insurance companies closes a gap in APRA's powers and allows us to supervise groups containing life insurance companies in the same way that we supervise groups containing ADIs or general insurers. The revised prudential standards aim to ensure registered NOHCs of life insurance companies have sound governance procedures which include that persons in responsible positions are fit and proper."
The four revised prudential standards will take effect from 1 July 2010.
The response paper and the prudential standards can be found on the APRA website at: http://www.apra.gov.au/Life/Enhanced-supervision-of-life-companies-Response-to-Submissions-March-2010.cfm
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, friendly societies, and most members of the superannuation industry. APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $3.6 trillion in assets for 22 million Australian depositors, policyholders and superannuation fund members.