APRA maintains status quo for life insurers

TheAustralian Prudential Regulation Authority(APRA) has issued Prudential Standard (PS) 3 aimed at prolonging the life of actuarial standard 6.01 (AS6.01) which requires life companies to keep $10 million in capital outside of their funds.

Recently the Life Insurance Actuarial Standard Board issued a raft of actuarial standards which sought to draw life companies and friendly societies closer together in terms of their regulations and standards. One of the standards was AS6.02 which was to repeal AS6.01 at the end of this month.

The repeal of AS6.01 meant that rather than have the mandatory $10 million in a life company’s coffers outside of their funds, that this figure was to be calculated based on risk rather than as a flat sum.

However, according to APRA’s senior policy manager Judy Lau, the industry regulator needs more time to consider whether the repeal of AS6.01 is necessary for the life industry. In anticipation of the repeal, APRA has issued PS3, which mirrors the about-to-be repealed AS6.01.

“APRA will be maintaining AS6.01 for the life insurers for the time being,” Lau says. “We will also be looking at how the new standards will apply to friendlies.”

She says APRA expects to be issuing further discussion papers at the end of the year. APRA’s release of PS3 follows the issue of a draft to the industry in April.

“Essentially, PS3 doesn’t change anything for the life industry,” Lau says.