Insurance (prudential standard) determinations No. 1 of 2011
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Insurance Act 1973, paragraph 32(1)(a) and 32(4)
Paragraphs 32(1)(a) and (b) of the Insurance Act 1973 (Insurance Act) provide that APRA may determine, in writing, standards relating to prudential matters that must be complied with by general insurers and authorised non-operating holding companies (NOHCs). Pursuant to subsection 32(5A) of the Insurance Act and paragraph 6(d) of the Legislative Instruments Act 2003, such prudential standards are legislative instruments for the purposes of the Legislative Instruments Act 2003. Subsection 32(4) of the Insurance Act gives APRA power to revoke prudential standards so determined.
- Background
Prudential Standard GPS 221 Risk Management: Level 2 Insurance Groups (GPS 221) contains risk management requirements for general insurance groups consisting of the requirement for a group-wide risk management framework, including reinsurance management, policies relating to outsourcing arrangements and business continuity management (BCM).
The requirements relating to outsourcing arrangements and BCM applicable to general insurance groups are now contained within Prudential Standard CPS 231 Outsourcing (CPS 231) and Prudential Standard CPS 232 Business Continuity Management (CPS 232), respectively.
The revised GPS 221 is identical to the previous version, with the exception of the following provisions that have been removed:
- the requirements relating to outsourcing and BCM ; and
- the ability of an insurance group to seek transitional arrangements from APRA prior to 2009.
2. Purpose of the instrument
The purpose of this instrument is to revoke GPS 221, as made by Insurance (prudential standard) determination No. 16 of 2008, and replace it with a revised version.
3. Operation of the instrument
The revised GPS 221 removes the requirements relating to outsourcing and BCM. The revised GPS 221 also removes a paragraph that provided for transitional arrangements prior to 2009, as this provision is no longer applicable. These amendments change requirements imposed on industry in form only, not in substance.
4. Consultation
In December 2010, APRA publicly consulted on its initiative to harmonise certain prudential standards across regulated industries, including CPS 231 and CPS 232. APRA received a small number of submissions during this consultation period and has reflected the feedback received where appropriate.
5. Regulation Impact Statement
A Regulation Impact Statement for the changes described in this Explanatory Statement was not required.