Modifications to prudential rules will align and consolidate a raft of industry-specific standards, according to the Australian Prudential Regulation Authority (APRA).

The draft standards covering outsourcing, business continuity, governance, and fit and proper persons replace a dozen standards governing individual industries.

APRA said the changes would “harmonise and clarify” current requirements, rather than introduce wholesale changes.

Feedback on the draft prudential standards is due by March 25. APRA says it expects to release the final version by mid-year.

APRA’s review of prudential standards is taking place alongside a review of capital standards, intended to introduce a more risk-sensitive, industry-aligned and global approach.

“For general insurance… the proposed changes will ensure that all material types of risks, including asset/liability mismatch, asset concentration and operational risks, are adequately addressed within the capital standards,” an APRA spokesman said.

“For life insurance, the proposed changes are more fundamental. APRA is proposing to simplify the current dual reporting requirements for solvency and capital adequacy and, by introducing the concept of a ‘capital base’ for life insurers, to align the capital structure for life insurers with that for general insurers and [authorised deposit-taking institutions].”

APRA said it intends to release draft capital standards in the second half of this year and final standards late in 2012. APRA announced the scope of its capital standards review in May 2009 and released a discussion paper in May 2010.

In other regulatory developments, APRA has announced that discretionary mutual funds (DMF) must continue to report data until the end of the 2011 financial year.

Previously, the three-year requirement for DMFs to file data on their operations was due to end in June last year.

“However the analysis and consideration by the Government of the data provided by DMFs is unlikely to be completed before the end of 2011,” APRA said in a statement.

In response to the HIH Royal Commission’s recommendation to extend prudential supervision to DMFs, in 2007 the Federal Government announced a three-year period of collecting information to improve its understanding of the business.

Although operating in a similar way to insurance companies, DMFs are not regulated by APRA because claims are not guaranteed. DMFs also escape state insurance taxes such as stamp duty and the fire services levy.