New Prudential Framework For General Insurance Groups Finalised By APRA

The Australian Prudential Regulation Authority has released the latest tranche of prudential reforms, this time affecting Level 2 insurers, which are general insurance groups that have either an APRA-authorised general insurer or an APRA-authorised non-operating holding company as the parent entity of the group.

General insurance groups have commercial advantages, such as greater pool of resources and risk diversification, but the trade-off is that financially sound insurers can be dragged down by failures in other parts of the corporate group. The new framework attempts to supervise those insurers in a way that will reduce the risk of infection from the financially troubled parts.