Insurers have been told to improve their capital adequacy reports following a review by the Australian Prudential Regulation Authority (APRA).

The regulator checked on insurers’ internal capital adequacy assessment process (ICAAP) reports earlier this year, after the requirement was introduced in January last year.

APRA wants to see more explanation in many ICAAP reports.

It says most “were of a reasonable standard and represented an adequate initial attempt at compiling such a document”.

But there were shortfalls in information between planned and actual ICAAP outcomes, with some insurers performing well and others not giving enough explanation.

Some need to provide more information on changes in risk profile and more commentary on factors driving future capital needs and stress testing.

APRA says some reports were treated as a “compliance exercise to meet prudential requirements rather than a document for the benefit of the institution and the board”.

In a few cases, wording was copied straight from the prudential standard into the report.

APRA says it expects this “compliance focus” to reduce.

General insurers’ reports should show a level of detail that reflects the size, nature and complexity of the company.

Some insurers did not include information on companies within their group.

The best reports had a schedule of how the ICAAP will be reviewed, APRA says.