A failure to update the frameworks would result in insurers needing to maintain dual valuation, actuarial, accounting and reporting systems, APRA says.
APRA (Australian Prudential Regulation Authority) has launched a consultation to update the insurance capital and reporting frameworks in recognition of the implementation of AASB 17 (Australian Accounting Standards Board 17 Insurance Contracts).
AASB 17 is a new accounting standard for insurance contracts. It is based on, and almost identical to the international standard, IFRS 17, issued by the IASB (International Accounting Standards Board).
In a new discussion paper, APRA outlined plans to align its capital and reporting frameworks for life, general and private health insurance with AASB 17 where appropriate.
APRA is also updating the Life and General Insurance Capital (LAGIC) framework, given it has not been substantively reviewed since it was implemented in 2013. The proposals are not expected to significantly change minimum capital requirements or materially impact premiums, the regulator said.
APRA Executive Board Member Geoff Summerhayes said the adjustments were necessary to maintain alignment between the regulatory framework and the new accounting standards. “APRA’s current capital and reporting frameworks have close linkages with the existing accounting standards,” he said.
“A failure to update the frameworks in a timely manner would create a divergence between the new accounting standard and APRA’s frameworks, resulting in insurers needing to maintain dual valuation, actuarial, accounting and reporting systems. This would lead to significant regulatory burden with potential for those costs to be passed on to policyholders.”
The discussion paper, available here, is open for comment until 31 March 2021.
APRA expects to release updated capital and reporting standards in late-2021 for further consultation.
The final APRA capital and reporting standards will become effective from 1 July 2023.