The Australian Prudential Regulation Authority (APRA) has foreshadowed tough new regulatory capital standards, with local insurers facing terms that are “broadly consistent” with banks.

APRA has issued a letter to update local general insurers and authorised non-operating holding companies about the 2009 Basel proposals on regulatory capital requirements, warning the definition of “eligible capital” for insurers is being considered as part of a broader review of general and life insurance capital standards.

The prudential regulator is a member of the international Basel Committee on Banking Supervision that has proposed improved global capital and liquidity requirements in the wake of the global downturn.

It says APRA “has sought to maintain a broadly consistent approach to the definition of capital for general insurers and authorised deposit-taking institutions”.

“General insurers should note that capital instruments issued subsequent to the date of this letter, and which are clearly inconsistent with the December 2009 Basel proposals, are unlikely to qualify for transitional relief.”

In a speech in Sydney on Friday, APRA Executive GM Diversified Institutions Division Wayne Byres said the regulator believes “it is both pointless and unhelpful to try to stand against the tide of international reform”.

“Any attempt to declare independence from the rest of the world will inevitably be counter-productive.”