APRA to focus on boards, disclosure and risk management
The Australian Prudential Regulation Authority (APRA) will continue to work on improving disclosure and risk management, according to Executive Member Ian Laughlin.
He told the Insurance Council of Australia regulatory update seminar in Sydney last week that implementation of the life and general insurance capital (LAGIC) regime is under way and APRA’s major policy work for the time being is focused on improving both regulation and supervision.
Following an audit of Australia’s financial system by the International Monetary Fund and World Bank, which assessed the insurance industry against global insurance core principles, Mr Laughlin says improvements can be made, although Australia has performed “quite well”.
“Our disclosure regime is not as strong as it could be,” he told the seminar. “It doesn’t meet international best practice, and governance arrangements need to be better disclosed.”
Mr Laughlin says risk management can be improved and APRA will be examining insurers’ recovery plans, or what happens if a company breaches its capital requirements.
“We are not happy with the industry’s use of catastrophe models and associated governance,” he said. “We will continue our focus on this, consult on data collection of reinsurance arrangements and we will reconsider our approach to alternative risk transfers.”
APRA is writing a concise guide for boards explaining what it expects from directors, and plans to run a “stocktake” of its requirements of boards to assess if they are consistent across industries and are reasonable.
“In short, are boards being asked to do too much and too often?”
Although he believes Australia is unlikely to have any globally systemically important insurers, Mr Laughlin says it probably will have some domestic ones that will be affected by international regulation.