After evaluating industry feedback, the Australian Prudential Regulation Authority (APRA) has refined its proposals on the prudential supervision of insurance groups.

In response to HIH Royal Commission recommendations, APRA released a discussion paper in May last year outlining its proposed approach to the supervision of authorised general insurers.

It received 20 submissions from the industry and has now released a response paper which seeks more feedback. The closing date for industry comments to the response paper “Prudential supervision of general insurance groups” is December 31.

APRA intends to release the final prudential standards in the second quarter of next year, to take effect from July 1.

In the industry submissions, several Australian-based insurance groups claimed the proposals treat groups with international operations more onerously than branches and corporate groups in Australia that are headed by foreign or commercial parents.

In response, APRA says it does not believe the consolidated insurance group policy proposed in the paper will result in a competitive disadvantage for Australians expanding their horizons.

There were also some concerns over how assets and liabilities in a foreign country would be measured, given that Australian prudential reporting requirements differ from accounting requirements elsewhere.

APRA says it does not require consolidated insurance groups to have the liabilities in each of its foreign subsidiaries valued directly by an actuary. However, it will require an actuary to assess whether the value of the liabilities of the consolidated insurance group, including foreign subsidiaries, are no less than if they were valued using Australian actuarial requirements and processes.

APRA Executive Member John Trowbridge says the proposed supervision of general insurance groups meets the HIH Royal Commission’s recommendations for corporate group supervision.

Mr Trowbridge says the response paper aims to reduce the compliance burden involved in the initial 2005 discussion paper.

“Issues raised by industry in relation to asset concentrations, also covered in the May 2005 discussion paper, are still under consideration by APRA and do not form part of the current proposals in the response paper.”