APRA Proposes to Amend Requirements of LPS 230 Related to Reinsurance
APRA proposed to amend the requirements of Prudential Standard LPS 230: Reinsurance (LPS 230), specifically as they relate to financial reinsurance. APRA seeks feedback from insurers about the proposed changes by December 22, 2017. APRA expects to finalize the revised standard next year, for implementation from April 01, 2018.
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; it requires a wide range of contracts to receive APRA approval and is very narrow in defining which contracts are exempt. APRA proposes to amend LPS 230 to align the approach to financial reinsurance with the approach taken in the general insurance industry, under the Prudential Standard GPS 230 on Reinsurance Management.
The proposed draft standard takes a principles-based approach to determine when approval is required, rather than the current prescriptive criteria. APRA expects that this approach will allow for clearer focus on the economic substance of reinsurance arrangements; support better quality discussions between life insurers and APRA supervisors regarding the key issues in reinsurance arrangements; and be more responsive to developments in the reinsurance market. The new approach is also intended to reduce the burden on APRA and life insurers, by minimizing instances in which contracts that are not of prudential concern are required to be submitted to APRA for approval. It will create greater consistency between the general insurance and life insurance prudential frameworks.
Related Links
Comment Due Date: December 22, 2017
Effective Date: April 01, 2018
Keywords: Asia Pacific, Australia, Insurance, Reinsurance, Financial Reinsurance, LPS 230, Reinsurance Management, Proposed Amendments, APRA
Previous Article
GAO Report on FHA Capital Requirements and Stress Testing PracticesRelated Articles
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.
BIS Bulletin Examines Cognitive Limits of Large Language Models
The use cases of generative AI in the banking sector are evolving fast, with many institutions adopting the technology to enhance customer service and operational efficiency.
ECB is Conducting First Cyber Risk Stress Test for Banks
As part of the increasing regulatory focus on operational resilience, cyber risk stress testing is also becoming a crucial aspect of ensuring bank resilience in the face of cyber threats.
EBA Continues Momentum Toward Strengthening Prudential Rules for Banks
A few years down the road from the last global financial crisis, regulators are still issuing rules and monitoring banks to ensure that they comply with the regulations.
EU and UK Agencies Issue Updates on Final Basel III Rules
The European Commission (EC) recently issued an update informing that the European Council and the Parliament have endorsed the Banking Package implementing the final elements of Basel III standards