Life Insurance (prudential standards) determination
Nos. 5, 6, 7, 8, 10 of 2010
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Life Insurance Act 1995, section 230A
Under subsection 230A(5) of the Life Insurance Act 1995 (Life Act) APRA may, in writing, revoke a prudential standard made in relation to prudential matters to be complied with by all life insurance companies (including friendly societies). Under subsection 230A(1) APRA may, in writing, determine a prudential standard made in relation to prudential matters to be complied with by all life insurance companies (including friendly societies).
- Background
In March 2010, APRA revoked LPS 310 and remade the standard as two separate prudential standards LPS 310 Audit and Related Matters (new LPS 310) and LPS 320 Actuarial and Related Matters (LPS 320). Due to the restructuring of these standards, consequential amendments are needed to certain prudential standards. Several other changes to correct other cross-references and typographical errors have also been corrected.
Life Insurance (prudential standards) determination Nos. 5, 6, 7, 8, 10 of 2010 revoke certain prudential standards applying to life insurance companies regulated by APRA and replace them with new prudential standards which are similarly titled. These prudential standards are:
- Prudential Standard LPS 1.04 Valuation of Policy Liabilities;
- Prudential Standard LPS 2.04 Solvency Standard;
- Prudential Standard LPS 3.04 Capital Adequacy Standard;
- Prudential Standard LPS 5.02 Cost of Investment Performance Guarantees;
- Prudential Standard LPS 6.03 Management Capital Standard; and
- Prudential Standard LPS 7.02 General Standard.
The key changes involve:
- amending cross-references to LPS 310 to reflect the new title of the standard;
- amending cross-references to actuarial-related content formerly contained in LPS 310 and now included in LPS 320.
APRA has determined that Life Insurance (prudential standards) determination Nos. 5, 6, 7, 8, 10 of 2010 be effective from the date of their registration on the Federal Register of Legislative Instruments.
2. Purpose and operation of the Instrument
The purpose of each instrument is to revoke the existing prudential standards applying to life insurers and replace them with corresponding standards which incorporate appropriate adjustments. APRA considered that it would be clearer and more effective to consolidate the necessary changes within new standards. For that reason, APRA decided to revoke and replace affected prudential standards rather than to amend them.
3. Consultation
APRA undertook public consultation on its proposed Prudential Standard LPS 310 Audit and Related Matters as part of its broader consultation on the ‘Enhanced Supervision of Life Companies’ package released on 7 May 2009.
The consequential changes were foreshadowed as part of this consultation. As the changes were minor APRA did not undertake consultation on the proposed changes.
4. Regulation Impact Statement
A Regulation Impact Statement for the consequential changes described in this explanatory statement was not required.