Insurance (prudential standard) determination No. 2 of 2010 - Amendments to Prudential Standard GPS 116 - Capital Adequacy - Concentration Risk Capital Charge

Overview

The Insurance (prudential standard) determination No. 2 of 2010, issued under the authority of the Insurance Act 1973, was introduced to address minor errors in the previously enacted Prudential Standard GPS 116 Capital Adequacy: Concentration Risk Capital Charge. Specifically, the determination corrects references to superseded paragraph references from an earlier standard, Prudential Standard GPS 110 Capital Adequacy, which were mistakenly included in the standard made on 23 June 2008. This legislative instrument, issued by the Australian Prudential Regulation Authority (APRA), aims to ensure the accuracy and clarity of the regulatory framework governing insurance prudential matters, thereby maintaining the integrity of the standards set for general insurers and authorised non-operating holding companies. The policy objective is to uphold the stability and soundness of the insurance sector by rectifying these errors without altering the substantive intent of the original standard.

Scope and Application

The Insurance (Prudential Standard) Determination No. 2 of 2010 applies to general insurers and authorised non-operating holding companies (NOHCs) as defined under the Insurance Act 1973. This determination is made by the Australian Prudential Regulation Authority (APRA) to ensure compliance with prudential standards related to capital adequacy, specifically addressing concentration risk capital charge. The amendment of Prudential Standard GPS 116, which is a legislative instrument under the Legislative Instruments Act 2003, is designed to correct minor errors in the references to previous approvals, determinations, directions, or requirements made by APRA. This amendment ensures that the references to superseded provisions are correctly aligned with the current standard, thereby maintaining the continuity of the prudential requirements in force. The changes are minor and do not alter the substantive intent of the standard. As no consultation was deemed necessary for these minor amendments, the determination is effective immediately upon its issuance.

Key Provisions

The main operative sections of the Insurance (prudential standard) determination No. 2 of 2010, reference GPS 116, relate to the correction of minor errors in the previous standard, GPS 110. Specifically, section 2 of the determination identifies that an error was made in identifying approvals, determinations, directions or requirements made by APRA under a previous standard. The determination corrects these errors by replacing the superseded references with the correct references in the table (subsection 2). This ensures that the approvals, determinations, directions or requirements in force under GPS 116 are clear and accurate. The obligations imposed by this determination on the parties it governs include ensuring that the updated table is used for reference purposes and that the minor changes do not affect the substantive intent of the original standard. The entities governed by this determination must comply with the corrected references as they are now clearly identified and applicable. There are no specific offences, penalties, or civil/criminal consequences outlined for breach of this determination as it pertains to the correction of errors in referencing. However, the entities governed by this determination must ensure they are compliant with the updated references to avoid any potential misunderstandings or misapplications of the standard. Failure to comply with the corrected references could result in regulatory scrutiny or non-compliance with the Insurance Act 1973, which could have further implications. The maximum penalties for non-compliance with the Insurance Act 1973 can vary depending on the specific breach, but they can include substantial fines and other regulatory actions.