The Australian Prudential Regulation Authority
(APRA) has released a response paper to its
various proposals on capital standards for general and life
insurers. According to APRA, the aims of the review include
improving the risk sensitivity of the standards and achieving
better alignment across APRA-regulated industries.
The response paper addresses submissions (from 144 general and
life insurers that participated and provided data) in respect of 42
non-investment-linked statutory funds, 35 investment-linked
statutory funds and 79 non-investment-linked benefit funds as part
of a quantitative impact study (QIS) of the
proposals set out in an APRA discussion paper and three technical
papers issued between May and September 2010.
Submissions commented that APRA's proposals would improve
the risk sensitivity of the standards but at the expense of making
them much more complex in certain areas.
In respect of general insurance, the QIS indicated that
APRA's proposals to update its capital standards would, without
refinement, have significantly increased required capital for the
general insurance industry. The range of life insurer QIS results
was more varied than was the case for general insurers with life
insurance industry capital requirements higher than APRA's
The response paper outlines APRA's intention to refine its
proposals in response to the QIS results and its further intent to
assess the impact of those refinements based on the results of a
second QIS, which is expected to be issued later this month with
submissions due at the end of July.
The key milestones in the timetable for the review are now:
29 April 2011
Release of QIS2 and technical specifications
31 July 2011
Submissions due on this response paper; QIS2 submissions
30 October 2011
Release of second response paper and draft prudential standards
31 January 2012
Submissions due on second response paper and draft prudential
Release of final prudential standards
Release of draft reporting standards for comment by 31 August
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