Life insurance (prudential standard) determinations Nos. 1 to 2 of 2014
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Life Insurance Act 1995, subsections 230A(1) and 230A(5)
Under subsection 230A(1) of the Life Insurance Act 1995 (Life Act), APRA has the power to determine standards (prudential standards), in writing, in relation to prudential matters to be complied with by all life companies (including friendly societies) and non-operating holding companies of life companies registered under the Life Act (registered NOHCs). Under subsection 230(5) of the Act, APRA may, in writing, vary or revoke a prudential standard.
On 3 December 2014, APRA made the following determinations (the instruments):
(1) Life insurance (prudential standard) determination No. 1 of 2014 (the instrument) which revokes Prudential Standard LPS 001 Definitions made under Life insurance (prudential standard) determination No. 1 of 2012 and determines a new Prudential Standard LPS 001 Definitions (LPS 001); and
(2) Life insurance (prudential standard) determination No. 2 of 2014 (the instrument) which revokes Prudential Standard LPS 320 Actuarial and Related Matters made under Life insurance (prudential standard) determination No. 11 of 2012 and determines a new Prudential Standard LPS 320 Actuarial and Related Matters (LPS 320);
These instruments will take effect on 1 January 2015.
- Background
In January 2014, APRA released a new cross-industry prudential standard Prudential Standard CPS 220 Risk Management (CPS 220), that applies to authorised deposit-taking institutions (ADIs), general insurers and life insurers, and Level 2 and Level 3 groups. A revised Prudential Standard CPS 510 Governance (CPS 510) was also released to ensure risk management governance principles were aligned to the new CPS 220.
These new and amended standards come into effect from 1 January 2015.
CPS 220 and revised CPS 510 necessitate a series of consequential amendments to existing industry-specific and cross-industry prudential standards. The majority of changes are necessary to remove duplication and to update cross-references.
2. Purpose and operation of the instruments
The purpose of making these instruments is to introduce amended prudential standards and revoke existing prudential standards to give effect to consequential changes as a result of the making of CPS 220 and the amendment to CPS 510.
Life insurance (prudential standard) determination No. 1 of 2014
The purpose of this instrument is to revoke LPS 001 and determine a new LPS 001.
LPS 001 defines key terms referred to in other prudential standards applicable to life companies and registered NOHCs.
The existing LPS 001 is updated with a new definition for ‘ensure’ and to update references to now revoked standards and replace them with references to applicable standards.
Life insurance (prudential standard) determination No. 2 of 2014
The purpose of this instrument is to revoke LPS 320 and determine a new LPS 320.
LPS 320 sets out the requirements for the roles and responsibilities of an Appointed Actuary, and the obligations of a life insurer to make arrangements to enable its Appointed Actuary to fulfil those roles and responsibilities.
The existing LPS 320 is updated to remove references to now revoked standards and replace them with references to applicable standards.
3. Consultation
APRA undertook a seven week consultation on the proposed consequential changes from August 2014.
4. Regulation Impact Statement
A Preliminary Assessment was submitted to the Office of Best Practice Regulation who confirmed that a Regulation Impact Statement is not required.
5. Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.
Attachment A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Life insurance (prudential standard) determinations Nos. 1 to 2 of 2014 and
These instruments are compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (HRPS Act).
Overview of the Legislative Instrument
These Legislative Instruments:
- include a new definition for ‘ensure’; and
- replace references to revoked standards with references to applicable standards.
Human rights implications
APRA has assessed these instruments and is of the view that they do not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the HRPS Act. Accordingly, in APRA’s assessment, the instruments are compatible with human rights.
Conclusion
These instruments are compatible with human rights because they do not raise any human rights issues.