APRA reveals insurers in run-off
Having revealed that 11 of the entities it regulates are in the "intensive care ward", Australian Prudential Regulation Authority (APRA) chairman, Wayne Byres, has told a Parliamentary Committee that a number of insurers are in "run-off mode".
The APRA chairman's evidence to the House of Representatives Economics Committee has revealed that the insurers in question have been judged to be no longer viable.
"We have some insurers who are in run-off mode, where it has been decided that they are no longer viable, in the sense that they do not have the financial resources to continue to write business," Byrnes said.
"They are in an orderly run-off, but absent some dramatic change in their affairs, they will be exited out of the industry," he said. "Policyholders will hopefully receive their money, but that will be on their way out."
Discussing the broader outlook, Byres said that, at the smaller end, some institutions could meet prudential requirements, but because of changes in market conditions and changes the [to] competitive landscape, "strategically they may be struggling for options for longer term viability".
"In those cases, we would not be forcing those institutions out of the industry, because they clearly meet, at this point in time, prudential requirements," he said. "But we would be asking some serious questions such as: ‘Longer term, how do you see yourself continuing to meet prudential requirements? If you cannot produce a convincing strategic outlook which demonstrates that you are a viable institution over the longer term, then you should at least be talking about the options -partnerships, mergers et cetera'."
Byrnes said that such an approach might provide for an orderly exit but "also, in some sense, an orderly continuation, just in a different form in the industry".
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