Treasury has published a paper on the proposed financial institutions and health insurers supervisory levies that will apply for the 2018-19 financial year for authorised deposit-taking institutions, life insurers and friendly societies, general insurers, superannuation funds and private health insurers .

The levies are designed to recover the operational costs of the Australian Prudential Regulation Authority (APRA), and other specific costs incurred by relevant Commonwealth agencies and departments including ASIC, ATO and ACCC.

While there has been a decrease in some costs APRA’s underlying net levies funding requirement for 2018–19 is $141.6 million, an increase of $5.6 million (4.1 per cent) relative to budget for 2017–18.

Relevantly in 2018–19, APRA’s funding was increased by $2.7 million through the measure ‘Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry — further support’ for external legal support and additional contract or related costs.

APRA’s supervisory activities in 2018-19 will include:

• for ADI’s: ongoing enhancements to the prudential framework, including further reforms generated by the Financial System Inquiry and the Basel Committee, new prudential requirements and measures to reinforce sound lending practices in residential mortgages;
• for life insurers and friendly societies: focus on the performance and capital adequacy of life insurers and friendly societies given the ongoing uncertainty in investment markets and the adverse trends in claims experience and lapse rates in some risk insurance business lines;
• for general insurers: APRA will continue to work with the industry to further improve stress testing capability and to develop robust recovery plans;
• in the superannuation industry, APRA’s supervisory activities will cover a range of issues, including continued focus on how RSE licensees are approaching strategic and business planning and the assessment of member outcomes. APRA will also support the Government’s initiative to developing a sound framework for offering post retirement products;
• for private health insurers, APRA will focus on aligning the PHI industry to the governance expectations of other regulated industries and work with insurers to improve the effectiveness of risk management function. In support of the Government’s priority on private health insurance, APRA will also be working to ensure the industry is prepared to respond to changes in government policy.