Introduction from Wayne Byres - APRA Insight

Welcome to the first edition of Insight for 2021.

March 11 marks exactly one year since the World Health Organisation declared COVID-19 to be a global pandemic. Despite fervent hopes that 2021 could bring an end to lockdowns, quarantining and face masks, the virus continues to significantly impact the way we live and work, and further challenges clearly lie ahead, especially as economic support measures are wound down. However, with the rollout of a national vaccine program now underway, we are hopefully getting closer to the day when the extraordinarily challenging health and economic conditions of the past year are lessening, and our social and work lives can return to some semblance of normality. 

However, what that ‘return to normal’ looks like is still very uncertain. COVID-19 has changed society in ways that may be difficult or impossible to reverse. The trend towards the digital transformation of the economy has been turbo-charged over the past year. Remote working arrangements have flourished, diminishing the economic importance of central business districts, and sparking a population redistribution towards the outer suburbs and regional areas. Entire industries in areas such as hospitality, tourism and the arts have been hard hit, forcing many businesses to close and leaving many Australians concerned about their employment. Yet other parts of the economy, such as home renovation businesses, online retailers, pharmaceuticals, home delivery services and video conferencing have boomed. 

Although APRA-regulated entities have generally demonstrated their resilience during the pandemic, these shifts have consequences for the banks, insurers and superannuation licensees that fund, insure and invest in these industries. Central to APRA’s ability to monitor these impacts on financial soundness and stability is access to accurate, timely and comprehensive data. Like our peer supervisors globally, APRA is increasingly harnessing the power of data analytics to gain deeper insights into the entities and industries we oversee. In this edition of Insight, we provide an update on our APRA Connect program, which will soon deliver a new tool to collect a broader range of data from more than 2,000 financial sector entities.

Another shift that both APRA and its regulated entities need to be thinking about is the transition to the low carbon economy. After several years of urging greater awareness of climate-related financial risks, this year APRA is taking two significant steps forward in encouraging action: a climate risk prudential practice guide, and the commencement of climate vulnerability assessments. In addition to updating APRA’s progress on these initiatives, this edition of Insight provides more detail on some of the international climate-related policy developments that have implications for Australia’s banks, insurers and superannuation funds.

This edition also examines the emergence of some concerning trends and practices in group life insurance in superannuation that APRA fears may, if unaddressed, lead to poor outcomes for members.

Finally, at a time when APRA is increasing pressure on underperforming superannuation funds to improve, merge or exit, our latest APRA Explains looks at the mechanics of successor fund transfers, and how to keep track of your money after a fund transfer occurs.