The Australian Prudential Regulation Authority (APRA) has released a paper setting out its response to industry submissions on its proposed approach to the prudential supervision of insurance groups. APRA is seeking industry comments on the response paper, Prudential supervision of general insurance groups. The closing date for industry comments is 31 December 2006.

APRA intends to release the final prudential standards in the second quarter of 2007, to take effect from 1 July 2007.

APRA
has refined its original proposals after incorporating feedback from
industry on the draft prudential framework outlined in its May 2005 discussion paper, Prudential supervision of corporate groups involving authorised general insurers which was developed in response
to HIH Royal Commission’s recommendations.

APRA had initially proposed a three-level supervision framework for general
insurance groups. APRA is now of the view, however, that a staged
implementation of corporate group supervision is the best way forward.

APRA will continue to supervise individually licensed insurance companies
(known as Level 1 supervision) and proposes to introduce a new level of
supervision of the general insurance group, incorporating all general
insurers in the group, both domestic and international, on a
consolidated basis (Level 2 supervision). Level 3 supervision, which
would take into account all entities within the group including those
not licensed by APRA, is being deferred.