IAG says the Australian Prudential Regulation Authority (APRA) is penalising the company for its Asian expansion strategy.

Its submission to the financial system inquiry claims the regulator’s consultation on life and general insurance capital standards shows it places greater weighting on the risk of IAG’s joint ventures in Asia.

“APRA excludes almost all the economic value of the joint ventures,” IAG says.

It argues this is at odds with the Federal Government’s vision for Australia being a leading financial services centre in the Asia-Pacific region.

IAG says APRA’s capital treatment of joint ventures in Asia puts Australian insurers at a disadvantage to international competitors.

The submission says regulation must differentiate between insurance, banking and other financial sectors, because insurers have shown they can absorb shocks from disasters without threatening the stability of the financial system.

Regulatory duplication should be removed and regulators should not overstep their mandate and take over the Government’s role in developing policy, IAG says.

It cites APRA’s push to make more data public as an “unwarranted and unjustified intrusion into business management”.

It argues against artificial premium reductions without an accompanying plan to deal with legacy issues and invest in risk reduction.

It says technological advances are making it easier for insurers to price to risk and pricing gives individuals and communities a message about reducing their vulnerability.

“IAG does not support measures that distort the private sector insurance market and result in households that have zero or extremely low levels of risk paying higher premiums to support those living in high-risk areas.”