APRA releases new prudential standards to strengthen the role of the Appointed Actuary within insurers
All APRA-regulated insurers are required, under Commonwealth legislation, to designate an Appointed Actuary, who provides independent advice to boards and senior management on key financial risks.
Following consultation papers released in June 2016 and September 2017, APRA has released details of two new prudential standards: Prudential Standard CPS 320 Actuarial and Related Matters (CPS 320) and Prudential Standard GPS 340 Insurance and Liability Valuation (GPS 340). They are accompanied by Prudential Practice Guide CPG 320 Actuarial and Related Matters.
The creation of a new cross-industry prudential standard (CPS 320) harmonises the requirements and expectations for Appointed Actuaries across all three insurance sectors, while still accommodating industry-specific differences.
Executive Board Member Geoff Summerhayes said: “Under these changes, Appointed Actuaries should be able to maintain greater focus on the most material matters, thereby better protecting the interests of their insurer and its policyholders. The changes are intended to make it easier for insurers to find and retain appropriately qualified professionals to fill this important role.”
“APRA developed the standards to address concerns about high turnover and declining seniority among Appointed Actuaries.”
“Applying the requirements of CPS 320 and GPS 340 will increase flexibility, streamline requirements and clarify the seniority of the Appointed Actuary within insurers,” Mr Summerhayes said.
Though industry was broadly supportive of APRA’s proposed changes, minor modifications were made to the final standards in response to industry feedback. APRA has also extended the implementation time for the new standards until 1 July 2019 in response to industry requests.
Mr Summerhayes said: “APRA will continue to work with industry in the lead-up to the implementation date to help insurers establish effective frameworks to accommodate the requirements of CPS 320 and GPS 340.”
“However the success of these reforms rests ultimately with Appointed Actuaries, insurers and their boards, which must now reflect on how the Appointed Actuary is used and supported within their organisations, and respond accordingly.”
The final package can be found on APRA’s website here: Role of the Appointed Actuary
- The Appointed Actuary is a statutory role required under the Insurance Act 1973, the Life Insurance Act 1995 and the Private Health Insurance (Prudential Supervision) Act 2015.
- Consultation on the Role of the Appointed Actuary
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $6 trillion in assets for Australian depositors, policyholders and superannuation fund members.