Insurers may be required to hold more capital under new risk-based rules from the Australian Prudential Regulation Authority (APRA), according to KPMG.

They may also need recovery and resolution plans, in line with the approach taken for the banking sector, which focuses on higher loss absorbency and recapitalisation capacity, it says in a report on global insurance regulation.

While the Australian insurance market features no globally systemically important insurers, it is likely to have several domestically important ones, although their identification is in its early stages.

“KPMG expects the major and highly specialised Australian insurers are likely to be captured.”

APRA’s risk-based regulatory capital framework for the insurance industry – Life and General Insurance Capital standards, or LAGIC – was introduced in January 2013.

Every insurer has completed at least one financial year under it and prepared a capital adequacy assessment process summary and report, but these are subject to review over a three-year period.

Last August APRA also released its conglomerate prudential standards, applicable to Level 3 groups operating in more than one APRA-regulated industry.

“APRA has identified eight such conglomerates, all of which are expected to have sufficient capital to meet the proposed capital standard without any significant actions required,” KPMG says.

The implementation date will depend on final recommendations from the Financial System Inquiry.