Australia: Financial Sector Assessment Program-Technical Note-Insurance Sector: Regulation and Supervision

International Monetary Fund

No 2019/049, IMF Staff Country Reports from International Monetary Fund

Abstract: This technical note provides an update on the Australian insurance sector and an analysis of certain key aspects of the regulatory and supervisory regime. The note analyzes the practice in relation to selected Insurance Core Principles (ICPs) in the context of a wider discussion of key issues in regulation and supervision. Despite the negative impact of the low interest rate environment, the life insurance industry retains sufficient loss absorption capacity. The Australian Prudential Regulation Authority (APRA) has undertaken a comprehensive reform of prudential regulation while improving the consistency of the framework between life and general insurers. This focused review confirms that prudential regulation and supervision by APRA is reasonably conservative. The risk-based capital framework is reasonably conservative, which facilitates supervisory risk assessments. APRA has high technical capacity to conduct effective supervision. While there are some gaps in the regulatory regime, APRA seeks to address these through its supervisory process. The report recommends that APRA should expand and deepen its scrutiny of group activities, especially those entailing risky investments and material intragroup transactions.

Keywords: ISCR; CR; APRA member; ASIC resource; risk management; ASIC commissioner; unit trust; ASIC IT infrastructure; enforcement power; ASIC capability; ASIC enforcement; APRA issues requirement; ASIC employee; ASIC enforcement review taskforce; data management system; Insurance companies; Insurance; Stress testing; Financial sector; Global (search for similar items in EconPapers)
Pages: 40
Date: 2019-02-21
New Economics Papers: this item is included in nep-ias
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