The
Australian Prudential Regulation Authority (APRA) has released its draft prudential framework for supervision of
general insurance groups.

  The
package consists of three draft prudential standards and a discussion
paper. The package also responds to
recommendations 38 and 39 of the HIH Royal Commission. Initial
consultation with the general insurance industry on this topic began in
May 2005.

The
foundation of APRA’s approach to the supervision of general insurance
groups is that the group as a whole should meet essentially the same
minimum capital requirements as apply to individual general insurers.
Being part of a wider insurance group can alter the risk profile of an
individual insurer through financial and operational
inter-relationships with other group members and through decisions and
initiatives taken at group level.

It
is intended that the final prudential standards implementing general
insurance group supervision will be released in the third quarter of
2008 and will become effective on 1 January 2009.