The insurance industry is in good shape to withstand the financial crisis, so the prudential regulator says it’s loosening the reins.

Australian Prudential Regulation Authority (APRA) Executive Member John Trowbridge told the Insurance Council of Australia Regulatory Update seminar last week that APRA will adopt more of a supervisory role this year.

“We are not loosening our standards, but there will be no change either, because the system is holding up well,” he said. “The global financial crisis is not changing the principles but it is changing the emphasis.”

He says ratings agencies will have to come under regulation, because the financial crisis has highlighted flaws in the system.

Mr Trowbridge also says regulatory boards will have to extend risk management to executive compensation.

And he says the industry will have to embrace group supervision.

“It is the biggest issue for insurance regulators globally,” he said.