Apra sets out framework for insurance supervision

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SYDNEY -The Australian Prudential Regulation Authority (Apra) has issued a package that will establish the prudential framework for the supervision of general insurance groups domiciled in Australia. The standards will become effective on March 31, 2009.

The package consists of three new prudential standards, one revised prudential standard and a response paper that addresses submissions received from the general insurance industry in relation to a consultation package released in April 2008. They are the result of more than three rounds of consultation with industry, over a three-year period, on general insurance group supervision.

The requirements of these standards will apply to all general insurance groups that have either an Apra-authorised general insurer or an Apra-authorised non-operating holding company as their parent entity.

"With these new standards, Apra is aiming to ensure that insurance groups are financially sound and that group interrelationships do not compromise the financial soundness of individual Apra-authorised insurers within the group," says Apra executive member John Trowbridge.

Apra's approach to general insurance group supervision is to treat, in principle, the insurance group as one economic entity and apply requirements to the group similar to those applying to individual Apra-authorised general insurers, in relation to capital, risk management, audit, actuarial reporting and valuation, governance, and fitness and propriety of responsible persons.

The governance, and the fitness and propriety requirements already apply to general insurance groups, and so precede these new standards.

The standards and the response paper can be viewed on Apra's website.