The Australian Prudential Regulation Authority (APRA) is switching to a more sophisticated system for assessing risks faced by insurers, banks and other licensees as its focus widens and new issues emerge.

APRA will begin using the Supervision and Risk Intensity (SRI) model this month, with the change expected to be fully implemented by June.

“The model includes a degree of tailoring to each individual sector, and its greater flexibility will help APRA respond to changes in the risk environment, such as those posed by the current pandemic,” Chairman Wayne Byres said.

The model replaces the Probability and Impact Rating System and the Supervisory Oversight and Response System that ARPA has used since 2002.

“Over recent years the level and nature of prudential risk has evolved,” Mr Byres said. “APRA has needed for example to increase its scrutiny of governance, culture, remuneration and accountability, and address new and emerging risks such as cyber-security.”

APRA has also released an updated version of its supervision philosophy and an SRI model guide. It will conduct a series of webinars next month to provide an overview of the system and to answer industry questions.