The Australian Prudential Regulation Authority (APRA) plans changes to the prudential framework to implement a cross-industry appointed actuary standard.

It has released draft amendments to 13 prudential standards, including one relating to general insurers: Prudential Standard GPS 116 Capital Adequacy Insurance Concentration Risk Charge.

The revised GPS 116:

• Removes reinsurance premium protection and capital market structures from the definition of alternative capital and risk mitigants
• Clarifies APRA’s expectation that the appointed actuary include details of the determination of the net premium liability (PL) provision that relates to catastrophic losses for the reporting year and the estimated PL offset to be utilised in the upcoming year in the actuarial valuation report
• Continues the requirement that the group actuary provide the board of a Level 2 insurance group with an opinion on the insurance concentration risk charge whenever substantial changes are made or at least annually.

APRA says the amendments will reflect consequential changes arising from the introduction last June of Prudential Standard CPS 320 Actuarial and Related Matters, and Prudential Standard GPS 340 Insurance Liability Valuation.

It intends to finalise the revised standards next month before implementation on July 1.

For more information on the proposed changes, click here.