The Australian Prudential Regulation Authority (APRA) has consolidated its 12 prudential standards for the general and life insurance industries into just four.

The new standards cover governance, fitness and propriety, outsourcing and business continuity.

“The consolidated standards closely reflect the existing industry‐specific prudential standards, with minor amendments to clarify requirements and ensure consistent application across industries,” APRA says in a letter to insurers.

The move comes after two years of consultation with the general and life insurance industries.

A draft paper on the four standards was released last December, and the submissions that resulted “largely sought further clarification on APRA’s intention in respect of specific drafting changes”.

“The final consolidated prudential standards are therefore substantially the same as the drafts released in December,” APRA says in the letter. “However, APRA has made minor amendments and editorial changes in response to the submissions.” 

One change in the new standards concerned a board’s ability to delegate some of its functions to senior management or a committee.

The amendments have clarified some of the guidelines for outsourcing these responsibilities and making sure overall risk management procedures are conveyed to the person or committee undertaking the work.

Other changes include clarifying the operational impact analysis as part of the business continuity management standard and this now must apply to all areas of an entity and not just in isolation.

General Insurance Level Two requirements have also been transferred to the relevant sections of the consolidated prudential standards.

The new consolidated standards will come into effect July 1 next year, giving insurers sufficient time for implementation, according to APRA.

The next stage of the process will be a series of draft “prudential practice guides” relating to the four consolidated standards. These will be released for consultation early next year.