APRA published the final revised Prudential Standard LPS 230 on Reinsurance Management and the standard will come into effect from April 01, 2018. LPS 230 applies to all life companies, including friendly societies, registered under the Act.
The current LPS 230 requires reinsurance contracts that are potentially financial reinsurance arrangements, or that include non-standard features or clauses that may impact on the extent of risk transfer, to be submitted to APRA for approval. APRA, on November 03, 2017, had proposed amendments to LPS 230 to refine the regulatory approach for such arrangements. The proposal was to replace the current approach with a more principles-based approach to assessing whether arrangements between a life company and a reinsurer require APRA approval. APRA had not intended to significantly widen the range of arrangements that must be submitted for approval. Rather, APRA would only expect to be consulted on arrangements that may give rise to potentially adverse prudential or policy owner outcomes.
APRA has received three submissions in response to the consultation, two of which were non-confidential. APRA amended its proposals in response to the submissions and these amendments have been incorporated in the final version of LPS 230, with key changes to the draft version of LPS 230 being listed in Attachment A to the APRA notification letter. APRA noted the feedback that it would be appropriate to support the principles-based approach in LPS 230, with some additional guidance on interpretation. Thus, APRA will release responses to the frequently asked questions (FAQs) in submissions, including the topics listed in Attachment B, which covers referable reinsurance arrangements.
Related Link: Consultation on LPS 230
Effective Date: April 01, 2018
Keywords: Asia Pacific, Australia, Insurance, Reinsurance, LPS 230, Reinsurance Management, APRA
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