The Australian Prudential Regulation Authority (APRA) is examining the definition of “eligible capital” for general insurers in a broader review of general and life insurance capital standards.

Executive GM Policy, Research and Statistics Charles Littrell says the review is part of an “extensive and globally co-ordinated effort” to reform the capital framework for authorised deposit-taking institutions (ADIs).

While the review focuses on banks, APRA maintains what it calls a “broadly consistent approach” to the definition of capital for general insurers and ADIs.

Mr Littrell says in a letter sent to general insurers last week that the oversight body of the Basel Committee on Banking Supervision has announced a substantial strengthening of existing capital requirements for banking institutions.

“The reforms will increase the minimum ordinary equity capital requirement and require institutions to hold an additional capital conservation buffer of ordinary equity to withstand future periods of stress.”

The new capital requirements are to be phased in from January 1 2013.

“It is likely that APRA will continue its policy of equivalent capital definitions between the ADI and insurance sectors, including any further reforms agreed by the Basel Committee as part of this capital review,” Mr Littrell said.