APRA's proposed Prudential Standards cover:
- Liability valuation. The standard ensures reliable and consistent valuation of insurance liabilities and promotes the provision of actuarial advice to management and Boards.
- Capital adequacy. The standard ensures that insurers maintain a minimum level of capital commensurate with the risk profile of the insurer's business.
- Reinsurance arrangements. The standard ensures that insurers have in place sound and prudent reinsurance arrangements.
- Risk management. The standard promotes strong corporate governance, access to appropriate independent expertise and systems for identifying, managing and monitoring risks.
- Transfer and amalgamation of insurance business. The standard provides details on the requirements necessary to facilitate the transfer of business between insurers.
- Assets in Australia. The standard defines "assets inside Australia" to enable the requirements of the Insurance Act 1973 to be met.
In order to ensure that the standards are fully aligned with the detail of the amended Insurance Act, APRA notes that it will be necessary to make further changes to the format and drafting of the Prudential Standards before they are tabled in Parliament. However, APRA does not intend to introduce new or amendment requirements above those that are currently contained in the new Prudential Standards.
Consequently, insurers are able to begin the process of assessing their compliance with the new regime and can now implement necessary changes to their current standards to ensure compliance with the Prudential Standards when they come into effect on 1 July 2002.