Insurers may no longer have to obtain external peer reviews of their appointed actuaries’ insurance liability valuation reports, under a proposal from the Australian Prudential Regulation Authority (APRA).

APRA says the costs of the annual reviews outweigh the benefits, and insurers will save $3.5-$6.1 million if the requirement is dropped.

The regulator wants to amend prudential standard GPS320 to remove the requirement and introduce a paragraph that allows it to request a peer review.

It wants industry feedback on the proposal by July 16, and may amend the standard in the final quarter of this year, to apply first to insurers with balance dates at December 31.

The proposal arises from APRA’s project to identify regulatory cost savings.

The Insurance Council of Australia has told the regulator a more flexible approach is needed and a review should not be required if a consulting actuary has done a comparable review.

It says removing the requirement would save costs without compromising the soundness of the prudential framework.

APRA introduced peer reviews in 2006 in recognition of the responsibility placed on appointed actuaries and the significance of insurance liabilities on general insurers’ balance sheets.

It said then peer reviews would help maintain and improve the quality and consistency of reports produced by appointed actuaries.

APRA says the quality of analysis in insurance liability valuation reports has improved and it “has noted very few issues of material significance identified by reviewing actuaries”.