APRA calls for reporting submissions

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Australian Prudential Regulation Authority wants your view on reporting requirements for life insurers.

Yesterday it wrote to a number of life insurers to let them know it is seeking submissions on how to make reinsurance counterparty reporting requirements better.

The current data APRA collects lacks enough detail to assess the impact of a reinsurer failure, which could cause life insurers to become insolvent.

“Life insurers are exposed to reinsurance counterparty risks when using reinsurance as a mechanism to transfer insurance risk and augment their capital position," APRA wrote.

The failure of a reinsurer could have a significant impact on the capital adequacy of a life insurer by both reducing the insurer’s capital base and increasing its prescribed capital amount.”
APRA wants to collect more information on reinsurance asset exposures before and after application of the insurance risk charge stresses.

“The failure of a reinsurer would affect the value of a life insurer’s adjusted policy liabilities. In the worst case, the insurer’s capital base would reduce by an amount equal to the reinsured part of the adjusted policy liabilities.

“This would occur if no recoveries could be made from the reinsurer and any tax benefits could not be netted against existing tax liabilities,” it said.

APRA wants feedback by 21 March on whether they should increase their reporting on this issue and whether the change will escalate business compliance costs.