Life insurers should incorporate emerging risks such as cyber attacks into their stress testing scenarios, the prudential regulator says.

The Australian Prudential Regulation Authority (APRA) last year assessed nine life insurers’ ability to conduct internal stress tests, which are used to calculate capital adequacy.

It says disruption from competitors and scenarios arising from improperly integrating acquired businesses should be part of the tests.

APRA says life insurers should use their test results in a broader context and integrate results into capital, risk management and business strategy processes.

It has advised them to self-assess their stress-testing frameworks and consider how they can improve them.