The Australian Prudential Regulation Authority (APRA) is looking closely at how general and life insurers are stress-testing their operations and the impact it will have on their capital reserves. 

In its 2010 annual report released last week the regulator says there is “room for improvement” and this will become “an area of increased supervisory focus”.

However, it also notes the “good shape” in which the general and life insurance industries have survived the global financial crisis.

The general insurance industry had almost twice APRA’s minimum capital requirements at the end of the financial year while life insurers have improved profitability and strong capital reserves.

The number of general insurers in Australia fell by two during the year to 130, but assets were up 4.2% to $99.2 billion.

General insurers paid APRA a total of $20.9 million in net levies and penalties during the year.

The number of life insurers operating in Australia has remained the same at 32 companies, according to the report.

These companies have $227.7 billion of assets, up 7% on the previous financial year.

APRA includes friendly societies with life insurers when reporting on the net levies and penalties paid by the sector. In 2010, they paid $12.8 million to APRA.

What APRA will be looking at next year: see ANALYSIS