Four new prudential standards were released on 4 March 2010 (the
Standards), taking effect from 1 July 2010.
The Standards amend (albeit only slightly) the draft standards
proposed by the Australian Prudential Regulation Authority (APRA)
in May 2009. APRA also released a
response paper in respect of submissions received in the
LPS 520 Fit and Proper (LPS 520);
LPS 310 Audit and Related Matters (LPS 310);
LPS 320 Actuarial and Related Matters (LPS
The Financial Sector Legislation Amendment (Enhancing
Supervision and Enforcement) Act 2009 gives APRA the power to
register and govern non-operating holding companies
(NOHCs) of life insurers in much the same way as
APRA currently governs and implements fit and proper personnel
standards on Authorised Deposit taking Institutions
(ADIs) and general insurers. Accordingly, LPS 510
and LPS 520 have been extended to include registered NOHCs of life
insurance companies. APRA did not receive any substantive comments
on the extension of LPS 510 and LPS 520 to NOHCs.
APRA has amended LPS 320 to be consistent with standards for
ADIs and general insurers by clarifying the obligations of a life
company in ensuring compliance with the prudential standard.
Further, LPS 310 provides that working papers retained in
accordance with the Corporations Act 2001 will be limited
to working papers in relation to prudential requirements of the
life company. This clarifies the requirement and reduces incidental
LPS 320 provides that APRA's requirements in respect of
special purpose actuarial reviews may be conducted utilising an
alternative professional standard. The response paper clarifies
that if a conflict between standards arises, APRA's
requirements override the professional standards to the extent of
What this all means?
The changes should better protect life insurance policyholders
by ensuring adequate governance procedures and that persons in
positions of responsibility are fit and proper.
The practical implication of all four revised standards is that
they give APRA greater powers in respect of the supervision of life
companies and NOHCs, in much the same way as they currently
supervise ADIs and general insurers.
On 12th November 2016, new laws will commence to protect small businesses from unfair terms in standard form contracts.
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