APRA Issues Corrections to Prudential Standards for General Insurers
APRA issued minor corrections to two prudential standards for general insurers: GPS 110 on capital adequacy requirements and GPS 116 on insurance concentration risk charge as part of the capital adequacy. The minor corrections reinstate words that were inadvertently deleted from the standards when they were remade in April 2019. The updated standards have been now published in the Federal Register of Legislation, with the effective date for the revised versions being July 01, 2019.
APRA, on April 17, 2019, had determined nine general insurance prudential standards, reflecting the consequential amendments arising from the introduction of the new Prudential Standard CPS 320 Actuarial and Related Matters (CPS 320) and Prudential Standard GPS 340 Insurance Liability Valuation (GPS 340). During the process of revoking the former versions of those nine general insurance prudential standards and determining the new versions of those standards, several words were inadvertently omitted from GPS 110 and GPS 116. The omitted words have been reinstated through this revision.
GPS 110 requires a general insurer or Level 2 insurance group to maintain adequate capital against the risks associated with its activities. GPS 116, however, requires a general insurer or Level 2 insurance group to maintain adequate capital against the risks associated with insurance concentration in its activities. The key requirements of GPS 110 are that a general insurer or Level 2 insurance group must:
- Have an Internal Capital Adequacy Assessment Process and must maintain required levels of capital
- Determine its prescribed capital amount having regard to a range of risk factors that may adversely impact a general insurer or Level 2 insurance group’s ability to meet its obligations. These factors include insurance risk, insurance concentration risk, asset risk, asset concentration risk and operational risk
- Comply with any supervisory adjustment to capital imposed by APRA
- Make certain public disclosures about the capital adequacy position of the general insurer or Level 2 insurance group
- Seek consent from APRA for certain planned capital reductions of the general insurer or Level 2 insurance group
- Inform APRA of any significant adverse changes in the general insurer or Level 2 insurance group’s capital position
Related Links
Effective Date: July 01, 2019
Keywords: Asia Pacific, Australia, Insurance, General Insurers, Prudential Standards, GPS 110, GPS 116, Capital Adequacy, Concentration Risk, APRA
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