The Insurance Council of Australia (ICA) has recommended changes to proposed internal capital adequacy assessment reviews in a response to the Australian Prudential Regulation Authority’s (APRA) draft prudential practice guide.

The guide says an insurer’s internal capital adequacy assessment process (ICAAP) will consider all risks to which the insurer is exposed. But ICA says most strategic risks would have a longer timeframe than the three to five years envisaged for the ICAAP, so would not be addressed.

It says insurers will still be implementing the life and general insurance capital (LAGIC) changes in 2014/15 and asks APRA to apply the ICAAP requirements flexibly.

The council says members welcome the acknowledgement that capital positions may vary around target levels, and may at times fall below the target.