APRA confirms consultation on changes to capital requirements for annuity products
The Australian Prudential Regulation Authority (APRA) has confirmed it will proceed with a public consultation on capital settings for annuity products. This aligns with APRA’s goal to support life insurers to increase the availability of retirement products for retirees, as outlined in its Corporate Plan 2024-25.
The key change proposed will be the approach to calculating the ‘illiquidity premium’ in LPS 112 Capital Adequacy: Measurement of Capital. This would lower life insurer capital requirements for annuity products, provided certain risk controls are in place.
The proposal will be released in the second quarter of 2025, inviting feedback from industry and broader stakeholder groups.
For more information on APRA’s engagement with industry and the broader set of demand and supply factors affecting the annuities market in Australia, refer to APRA’s July 2024 industry roundtable note.
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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.