Both life and general insurers could face increased capital requirements under changes proposed by the Australian Prudential Regulation Authority (APRA).

The prudential regulator is currently undertaking a review of insurance capital standards with draft standards due to be released in December. Final standards and reporting forms will be issued next year ahead of implementation in 2012.

APRA intends to introduce a consistent framework across the general and life insurance industries as well as across authorised deposit-taking institutions.

While life insurers face significant changes under the proposals, APRA has forecast only modest changes for general insurers.

Among the proposals is an improvement in risk sensitivity measures included in the regulation of capital standards for both life and general insurers.

Speaking at an industry seminar in Sydney last week on his last day as APRA Executive Member, John Trowbridge said the changes build on work undertaken in the wake of the failure of HIH Insurance in 2001 and further work in 2008.

“We believe we’ve done a good job but a few things need to be revisited,” he said.

 Mr Trowbridge says the changes also reflect international developments but “we are only applying them if we feel it is relevant”.

“Insurers with matched assets and liabilities and diversified investment portfolios will be rewarded as opposed to those that don’t in future,” he said. “In terms of [required] capital, some insurers will go up, and some will go down.”