Featured Product

    APRA Announces Review of LPS 117 on Capital Adequacy of Life Insurers

    December 15, 2017

    APRA published a letter about the review of Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge or ACRC (LPS 117), to ensure it remains fit for purpose and in line with the objectives in the APRA mandate. APRA intends to commence this review in the second half of 2018. The review will focus on the elements of LPS 117 dealing with asset concentration risk arising from reinsurance arrangements. It may also be necessary to review related aspects of Prudential Standard LPS 114 Capital Adequacy: Asset Risk Charge.

    APRA has received a number of representations on the increasing use (by APRA-registered life insurers) of reinsurance arrangements entered into with offshore life reinsurers that are not registered under the Life Insurance Act 1995 (non-registered reinsurers). These representations have focused on two main issues: that non-registered reinsurers are not subject to the same regulatory requirements as APRA-registered life insurers; that there may be potential for systemic risks being introduced to the Australian life insurance market through increased involvement of non-registered reinsurers.

    In some cases, APRA has exercised its discretion to adjust the requirements of LPS 117, to allow collateral trust arrangements to be used to mitigate exposures to non-registered reinsurers for the purpose of calculating the ACRC. These adjustments have been made where APRA was satisfied that the specific collateral trust arrangements provided an effective risk mitigant for ACRC purposes. Until the outcomes of the review of LPS 117 are clearly known, APRA is not inclined to grant any further discretionary approvals to allow entities to mitigate exposures to non-registered reinsurers for the purpose of calculating the ACRC. As part of the review, APRA will assess the future use of collateral trust arrangements, including whether they should be permitted for the purposes of LPS 117.

     

    Related Link: APRA Letter (PDF)

    Keywords: Asia Pacific, Australia, Insurance, Reinsurance, LPS 117, Capital Adequacy, ACRC, Systemic Risk, APRA

    Featured Experts
    Related Articles
    News

    FSI Paper Examines Use of Suptech Initiatives by Financial Authorities

    The Financial Stability Institute (FSI) of BIS published a paper that examines the suptech developments by analyzing suptech initiatives of 39 financial authorities globally.

    October 17, 2019 WebPage Regulatory News
    News

    US Agencies Consult on Policy Statement on Allowance for Credit Losses

    US Agencies (FDIC, FED, NCUA, and OCC) are consulting on the policy statement on allowances for credit losses and on the guidance on credit risk review systems.

    October 17, 2019 WebPage Regulatory News
    News

    PRA Consults on Approach to Supervising Liquidity and Funding Risks

    In consultation paper (CP27/19), PRA published a proposal (CP27/19) to update the supervisory statement SS24/15 on the PRA approach to supervising liquidity and funding risk.

    October 17, 2019 WebPage Regulatory News
    News

    FSB Report Examines Implementation and Impact of G20 Financial Reforms

    FSB published fifth annual report on the implementation and effects of the G20 financial regulatory reforms.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Launches Consultation on Comprehensive Pillar 3 Disclosures

    EBA proposed the new comprehensive implementing technical standard (ITS) for public disclosures by financial institutions.

    October 16, 2019 WebPage Regulatory News
    News

    EBA Consults on Revised Technical Standards on Supervisory Reporting

    EBA launched a consultation on the revised implementing technical standards, or ITS, on supervisory reporting.

    October 16, 2019 WebPage Regulatory News
    News

    BoE and FCA Examine Use of Machine Learning in Financial Sector in UK

    BoE and FCA published a report on the results of a joint survey by BoE and FCA in 2019 to better understand the use of machine learning in the financial services sector in UK.

    October 16, 2019 WebPage Regulatory News
    News

    BCBS Report Examines Progress on Adoption of Basel Framework

    BCBS published the seventeenth progress report on adoption of Basel regulatory framework.

    October 16, 2019 WebPage Regulatory News
    News

    APRA Proposes Measures to Strengthen Capital for Bank Depositors

    APRA proposed changes to APS 111, which is the prudential standard on measuring capital adequacy and establishes the criteria for regulatory capital requirements of authorized deposit-taking institutions.

    October 15, 2019 WebPage Regulatory News
    News

    EIOPA Consults on Technical Advice for the 2020 Review of Solvency II

    EIOPA is consulting on an opinion that sets out technical advice for the 2020 review of Solvency II.

    October 15, 2019 WebPage Regulatory News
    RESULTS 1 - 10 OF 3981