Featured Product

    APRA Observations from Thematic Review on Recovery Plans of Insurers

    September 18, 2019

    APRA issued a letter to general insurers and life insurers, outlining observations from a recent thematic review on recovery planning by insurers. The attachment to the letter presents key observations of APRA, along with certain best-practice examples. APRA conducted this thematic review with a group of in-scope large and medium-size general insurers and life insurers, assessing their recovery plans against the recovery planning guidance provided to the in-scope insurers. APRA will use the outcomes of the thematic review to inform its development of a prudential framework for recovery and resolution, which will include a prudential standard and the accompanying guidance. APRA plans to consult on this framework next year.

    APRA observed that the recovery planning process has assisted in-scope insurers to advance their overall approach to risk management and to build a better understanding of the importance of recovery planning. However, considerable scope for improvement remains, before in-scope insurers can be assessed to have credible plans in place that are effectively integrated with the risk management framework. APRA considers usability of the recovery plan as a key factor in assessing its credibility. APRA expects recovery planning to be a dynamic process, wherein the plans continue to be assessed, tested, and improved with ongoing board oversight. The key observations include the following:

    • Governance. Robust governance arrangements are essential both for effectively developing and maintaining the recovery plan and for ensuring that appropriate monitoring and escalation processes are in place to allow for timely implementation of recovery options. This includes integration with risk management framework; monitoring, escalation, and activation processes; and operational testing.
    • Trigger frameworks. The trigger framework should operate in a manner that reflects the escalating nature of stress events, to facilitate timely contingency planning and the intensifying of responses as the severity increases. The areas of better practice are related to a range of metrics and timely trigger points.
    • Recovery options. The core element of a credible recovery plan is a comprehensive menu of realistic recovery options, supported by the requisite level of supporting analysis required to assess and implement the options. APRA lists areas of better practice with respect to menu of recovery options, valuations and assumptions of recovery options, and supporting analysis for recovery options.
    • Scenario analysis. The use of scenario analysis provides an important mechanism to help assess the credibility of the recovery plan, in particular the calibration of the trigger framework and feasibility of recovery options. The scenarios, therefore, need to be sufficiently severe to activate the recovery plan. 

     

    Related Link: APRA Letter (PDF)

     

    Keywords: Asia Pacific, Australia, Insurance, Recovery and Resolution, Thematic Review, Governance, Recovery Planning, APRA

    Related Articles
    News

    EU Amends CRD4 and CRD5 as Part of Capital Markets Recovery Package

    EU published Directive 2021/338, which amends the Markets in Financial Instruments Directive (MiFID) II and the Capital Requirements Directives (CRD 4 and 5) to facilitate recovery from the COVID-19 crisis.

    February 26, 2021 WebPage Regulatory News
    News

    EU Committee Recommends Systemic Risk Buffer of 4.5% in Norway

    The Standing Committee of the European Free Trade Association (EFTA) recommended that a systemic risk buffer level of 4.5% for domestic exposures can be considered appropriate for addressing the identified systemic risks to the stability of the financial system in Norway.

    February 25, 2021 WebPage Regulatory News
    News

    PRA Clarifies Approach to Onshoring of Credit Risk Rules for UK Banks

    In a recent statement, PRA clarified its approach to the application of certain EU regulatory technical standards and EBA guidelines on standardized and internal ratings-based approaches to credit risk, following the end of the Brexit transition.

    February 25, 2021 WebPage Regulatory News
    News

    FSB Sets Out Work Priorities for 2021

    In a recently published letter addressed to the G20 finance ministers and central bank governors, the FSB Chair Randal K. Quarles has set out the key FSB priorities for 2021.

    February 25, 2021 WebPage Regulatory News
    News

    EU Publishes Corrigendum to Revised Capital Requirements Regulation

    EU published, in the Official Journal of the European Union, a corrigendum to the revised Capital Requirements Regulation (CRR2 or Regulation 2019/876).

    February 25, 2021 WebPage Regulatory News
    News

    ESAs Issue Statement on Application of Sustainability Disclosures Rule

    ESAs published a joint supervisory statement on the effective and consistent application and on national supervision of the regulation on sustainability-related disclosures in the financial services sector (SFDR).

    February 25, 2021 WebPage Regulatory News
    News

    EC Consults on Crisis Management and Deposit Insurance Frameworks

    EC published a public consultation on the review of crisis management and deposit insurance frameworks in EU.

    February 25, 2021 WebPage Regulatory News
    News

    HKMA Enhances Loan Guarantee Scheme to Alleviate Pressure on SMEs

    HKMA announced that enhancements will be made to the Special 100% Loan Guarantee of the SME Financing Guarantee Scheme (SFGS) and the application period will be extended to December 31, 2021.

    February 24, 2021 WebPage Regulatory News
    News

    EBA Proposes Standards for Supervisory Cooperation Under IFD

    EBA launched consultations on the regulatory and implementing technical standards on cooperation and information exchange between competent authorities involved in prudential supervision of investment firms.

    February 24, 2021 WebPage Regulatory News
    News

    BoE Addresses Banks in Scope of First Resolvability Assessment

    BoE issued a letter to the CEOs of eight major UK banks that are in scope of the first Resolvability Assessment Framework (RAF) reporting and disclosure cycle.

    February 24, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6629