The Australian Prudential Regulation Authority (APRA) has clarified how reinsurance arrangements should be treated as assets, following a consultation that started last year.

APRA received four submissions after asking general insurers and Lloyd’s Australia for comment on reinsurance recoverables and payments and the asset requirements of the Insurance Act.

It has determined that from July 1 all reinsurance recoverables from Lloyd’s underwriters, or those supported by collateral, should be treated as insurer assets in Australia.

Some insurers told the regulator the law should be changed to enable greater efficiency in administering group-wide reinsurance contracts.

APRA says it will consider specific arrangements on a case-by-case basis, but they must comply with the Act.

Insurers must hold assets in Australia of at least equal value to their liabilities, and APRA says the onus is on companies to ensure they comply with the Act, and that their reinsurance arrangements are compliant.