APRA satisfied with state of insurance and super

The Australian Prudential Regulation Authority has expressed confidence that Australia’s major insurers and superannuation funds are well-positioned to withstand current market volatility and tighter liquidity.

The chairman of APRA, John Laker, told a Senate Committee late last week that while the financial services regulator had been in what could be described as “a heightened state of alert” supervisory intervention in individual cases had not been necessary.

Looking at the general insurance industry, Laker said APRA’s preliminary analysis suggested that the declines in equity markets would not have a significant impact on the profitability or capital levels of the industry.

He said the focus for many insurers was, instead, on the impact of recent weather-related events while the life insurance industry had also entered the period of market turmoil in a strong capital position and held resilience reserves to cover shocks of recent dimensions.

Discussing superannuation, Laker said the recent declines in equity markets would reduce the asset values of accumulation funds, but these losses had to be set against the substantial cumulative gains over the past few years.

He said defined benefit funds would have experienced similar losses, but most of these funds have built up strong funding positions because of the same cumulative gains.