No matter what the Australian Securities and Investments Commission (ASIC) and its former Chairman might think, the Australian Prudential Regulation Authority (APRA) still thinks the insurance industry needs unique – and stricter – corporate governance and fitness and proprietary standards. And APRA wants to monitor what is in fact its sister regulator’s job.

Charles Littrell, APRA’s Executive General Manager Policy, Research and Consulting, told an insurance law and litigation conference in Sydney last week that although general insurers “are considerably sounder than was previously the case”, the industry has “further progress to make” before its practices are “within APRA’s comfort zone”.

He says the regulator hasn’t forgotten points made in its December discussion paper on proposed second round reforms, especially when it comes to proposals regarding governance standards and improved disclosure.   

On corporate governance, APRA wants to address matters including “the need for and definition of independent directors, board risk committees, and auditor and actuary requirements”. It recently called for submissions on the concept of changing corporate governance requirements, which Mr Littrell says has resulted in “much input, ranging from the very broad to the very detailed”. 

“The major broad criticisms we received fell into two categories: regulatory overlap and excessive prescription,” Mr Littrell said. “On the overlap front, many commentators suggested that APRA should not make rules in areas already addressed by the Australian Stock Exchange (ASX) and ASIC.”

That would include former APRA executive and ASIC Chairman David Knott. As reported in Sunrise Exchange News two weeks ago, Mr Knott – who is now a special adviser at law firm Allens Arthur Robinson – told an AAR conference that APRA should let ASIC do its job. 

“In my opinion, APRA is completely misguided in seeking to impose prescriptive governance standards that follow a different approach to the one adopted by the Government, ASIC and the ASX for the rest of the economy,” he said.

But Mr Littrell says only “a minority of insurance companies are listed on the ASX, so there is no overlap in most instances”.

“The argument that Corporations Act governance rules are sufficient on their own, however, remains to be made.”

He says fitness and propriety is “closely associated with governance”, and measures that exceed the standards of the Corporations Act should be taken to protect consumers.  “APRA will retain the right to remove a person who is unfit or improper from his or her position, should the relevant entity choose for some reason not to do so,” Mr Littrell said. “This right is restricted to directors, senior management, auditors, and actuaries.”