The Australian Prudential Regulation Authority (APRA) has updated a standard to reduce risks from the rising use of offshore reinsurers by the life industry.

Deputy Chairman Helen Rowell says the finalisation of LPS 117 is a significant milestone that will strengthen APRA oversight while ensuring ongoing access to offshore benefits that include an extra source of capacity and an avenue to access competitively priced support for innovative product designs.

“When risk is placed offshore, APRA has a limited ability to ensure reinsurance arrangements adequately safeguard policyholders and insurer resilience,” she said.

“The updated LPS 117 addresses this by providing a balanced approach to mitigating these risks, setting appropriate limits so that Australian life insurers can continue using the offshore reinsurance market in a prudent manner.”

APRA is seeking additional feedback on a small number of amendments arising from a consultation on accounting changes and Life and General Insurance Capital (LAGIC) framework updates, with comment open until April 29.

The revised LPS 117 will start from July 1 next year, aligning with changes expected to prudential capital standards due to the introduction of AASB 17 Insurance Contracts accounting arrangements.

More details are available here.