The Australian Prudential Regulation Authority (APRA) has put together a team of specialist staff to assess the impact of the recent natural catastrophes in Australia and NZ on the overall insurance industry and individual companies.

But the regulator is confident it will find little of concern, with APRA Executive Member Ian Laughlin saying he is “confident in the capacity of the general insurance industry in Australia to meet all of its claims obligations”.

Mr Laughlin told the Insurance Council of Australia’s Regulatory Update seminar that to complete its assessments, APRA wants to see updated high-level capital plans and financial forecasts from all general insurers exposed to the catastrophes.

While the disasters have “thoroughly tested” the adequacy of insurers’ reinsurance arrangements and their ability to reinstate or replace their reinsurance programs, APRA is “scenario modelling” the impact of another major catastrophe.

“As part of our assessment, we are applying a stress test that assumes at least one further major catastrophic event of similar proportion to the largest loss experienced to date, before the end of the financial year,” he said.

“We want to satisfy ourselves that each APRA-regulated general insurer has the financial capacity, now and in the future, to meet our capital requirements and, ultimately, its claims from policyholders.

“APRA does not expect that any general insurer it regulates will have difficulty continuing to operate in the face of the potential losses from these recent disasters, though some smaller insurers have had capital support from parents,” he said. “The resilience of our general insurance industry in these circumstances is a credit to management and boards.”

APRA is also using the current circumstances to “inform” its thinking on its life and general insurance capital (LAGIC) review of capital standards. The review aims to make its risk-based capital requirements more sensitive to the risk profile of each insurer.

APRA’s response paper to its LAGIC consultations will be released in the next few weeks.