The Insurance Council of Australia (ICA) says its members are concerned about the Australian Prudential Regulation Authority (APRA) gaining greater power without adequate safeguards.

It says measures must be taken to ensure increased powers are used solely to achieve prudential objectives.

“Presumably, in a free market economy such as Australia’s, good governance would require there be such a connection to justify APRA’s intrusion into the everyday management of an organisation,” ICA’s submission to the regulator’s draft prudential standards on conglomerate groups says.

Conglomerate, or level three, groups operate across more than one industry. APRA wants a supervisory framework for them covering governance, risk exposures, risk management and capital adequacy, plus eight prudential standards.

The regulator also proposes applying some of the changes to level two groups – general insurers headquartered in Australia.

ICA says APRA must be mindful of how more regulation will affect insurers’ international competitiveness, and should not put Australia “ahead of the pack” on regulation.

It says if domestic requirements are introduced too early, insurers may need to redesign compliance systems later to meet new international laws, so implementation here must be aligned with global developments.

ICA says the definition of a level three group is very broad and not clearly defined. It wants published guidance on how APRA determines a group.

It says the definition could apply to overseas insurers with an Australian subsidiary, and there may be serious unintended, unwarranted consequences for non-Australian or non-APRA-regulated entities that are part of an insurance group.