Life Insurance (prudential standards) determination No.2 of 2008
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
The Financial Sector Legislation Amendment (Review of Prudential Decisions) Act 2008 (RPD Act) amended the Life Act. Amongst other things, the RPD Act introduced a court-based process for disqualifying an individual from certain roles in a life company; it removed the necessity for ministerial consent for some decisions; and it streamlined some of APRA’s directions powers where appropriate.
The Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007 (SRR Act) also amended the Life Act. Amongst other things, the SRR Act introduced whistleblower protection; it provided for APRA to exercise discretion to vary prudential requirements for a regulated institution; and it harmonised breach reporting across the Life Insurance Act 1995, the Insurance Act 1973, the Banking Act 1959 and the Superannuation Industry (Supervision) Act 1993.
Prudential standard LPS 510 Governance (LPS 510) applies to all life companies (including friendly societies). It sets out minimum foundations for good governance of life companies. It aims to ensure that life companies are managed in a sound and prudent manner by a competent Board of directors, which is capable of making reasonable and impartial business judgements in the best interests of the life company and which gives due consideration to the impact of its decisions on policyholders.
2. Purpose of the Instrument
In light of the recent amendments to the Life Act, outlined above, APRA is revoking and re-making LPS 510 with minor amendments. This is to ensure that LPS 510 continues to be consistent with the Life Act.
3. Operation of the Instrument
This Instrument revokes LPS 510 and re-makes the prudential standard with the following minor amendments:
(i) a footnote has been inserted in to the heading above Paragraph 57. It has been included to ensure this part of the prudential standard is read in conjunction with the whistleblowing provisions in the Life Act and in LPS 520;
(ii) paragraph 59 has been amended to preserve transitional relief for auditors that was available under the previous version of LPS 510; and.
(iii) paragraph 60 has been inserted to improve consistency between the fit and proper prudential standards across the different APRA-regulated industries. Paragraph 60 of the new LPS 510 replicates paragraph 65 of Prudential Standard GPS 510 Governance (May 2006), a prudential standard made under section 32 of the Insurance Act 1973 (Insurance Act). Paragraph 60 reflects subsection 230A(4) of the Life Act, which was amended by the SRR Act so as to be consistent with subsection 32(3D) of the Insurance Act.
4. Consultation
APRA considered that public consultation was not necessary for the amendments to LPS 510. The amendments are minor and consequential to amendments to the Life Act. The Treasury conducted public consultation in relation to these amendments to the Life Act.
APRA undertook public consultation on the broader proposal to introduce governance requirements across all APRA-regulated institutions.