The Australian Prudential Regulation Authority (APRA) has finalised refinements to the general insurance prudential framework.

The refinements include changes to capital requirements for foreign reinsurance and equity and property investments.

Reinsurers not regulated by APRA will also face a risk-based scale regarding reinsurance recoverables.

The regulator earlier backed away from a proposal forcing reinsurers not regulated by APRA to reserve a 100% capital charge against a claim. The concession allows clients to continue to access well-regarded foreign insurers unhindered.

APRA has grouped insurers into five categories: locally incorporated insurer, wholly owned subsidiary of local or foreign insurer, foreign insurer operating a foreign branch, association captive insurer and sole parent captive insurer.

Association and sole parent captives are subject to minimum capital requirements of $2 million.

APRA confirmed required capital factors for listed equity investments will increase from 8% to 16%. The regulator initially proposed an increase to 25% but revised the figure following industry opposition.

Capital factors for direct property and other unlisted investments increase to 20%.

APRA Executive Member John Trowbridge thanked the industry for its active participation in the consultation process “and for the valuable contributions that have led to a well-balanced package of refinements”.

The changes were prompted by new rules surrounding direct offshore foreign insurers.

Reinsurance changes take effect on January 1 next year while all other changes are effective from next month.