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The Australian Prudential Regulation Authority (APRA) has signalled fundamental changes around the capital requirements for life insurers, describing the new regime as being simpler and more risk-sensitive.
The regulator flagged the changes in a discussion paper released this week dealing with the capital standards of both life and general insurers, but acknowledged that the changes being proposed for life companies were “more fundamental”.
APRA executive member John Trowbridge said the changes were expected to result in a number of benefits to the general and life insurance industries.
“The proposed new capital requirements for life insurers are simpler and more risk-sensitive than the current arrangements, as well as easier for all stakeholders to understand and work with in both substance and presentation.”
Detailing the changes proposed for the life industry, Trowbridge said APRA proposed to simplify the current dual reporting requirements for solvency and capital adequacy and align the capital structure for life insurers more closely with the capital structure for authorised deposit-taking institutions and general insurers in Australia.
He said this improved alignment of capital requirements would also facilitate adoption of APRA’s proposed supervisory framework for conglomerate groups.
