The Australian Prudential Regulation Authority (APRA) has released final versions of capital standards for insurers and told them they should be working on implementing the system.

APRA Executive Member Ian Laughlin says the life and general insurance capital review (LAGIC), begun in 2010, is moving to its implementation phase.

During two years of consultation, APRA has received more than 120 submissions and more than 100 insurers have participated in studies.

Over coming months, APRA will progressively release the final versions of prudential standards to come into force on January 1 next year.

“Insurers should now be focused on implementing the revised capital framework,” Mr Laughlin said.

In a response paper on the submissions it has received, APRA says the standards are intended to improve risk sensitivity and the appropriateness of capital standards in life and general insurance.

The remaining final prudential standards and draft prudential practice guides, along with final reporting forms and instructions, are expected to be released in October.

APRA says some insurers are likely to seek transition arrangements for the new capital requirements. These will be determined case by case “and must be supported by compelling arguments and capital projections”.

Applications must be received by September 30.

Many submissions raised questions about the internal capital adequacy assessment process (ICAAP).

APRA says this is fundamentally an internal process that must be overseen by insurers’ boards, which should already be working on it.

“Insurers should already be developing their ICAAP and engaging with their board and with APRA,” it said.