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The Actuary The magazine of the Institute & Faculty of Actuaries

New standards for Australian insurers

Australia’s financial services regulator has released new standards in the second stage of its ongoing reform of general insurance regulations. The Australian Prudential Regulation Authority (APRA) said the three standards that make up the ‘stage 2’ reforms address recommendations of the HIH Royal Commission that were part of the commission’s 2003 report on the collapse of general insurer HIH Insurance Ltd. The three new standards, covering risk management, reinsurance, and audit and actuarial reporting, ‘clarify and strengthen APRA’s previous requirements in risk and reinsurance management and emphasise the importance of documenting reinsurance contracts for more certainty’, APRA said.

Included in the new standards are requirements for:

  • a business plan that includes the insurer’s ability to meet future capital requirements;
  • senior management to provide a financial information declaration annually, with documentation of reinsurance arrangements;
  • prior approval of limited [finite” risk-transfer arrangements; and
  • approved actuaries to prepare an annual report on the company’s financial condition.

APRA-regulated general insurers must comply with the new standards beginning 1 October 2006.