The Australian Prudential Regulation Authority (APRA) has finalised the amendments to its guidance on strengthening the preparedness of insurers, banks, and superannuation funds when responding to crises.
In December 2021, APRA started seeking industry feedback on two new prudential standards designed to improve the recovery and resolution planning among APRA-regulated entities:
CPS 190 aims to ensure that all APRA-regulated entities have recovery and exit plans to respond to severe financial stress. Meanwhile, under CPS 900, large or complex APRA-regulated entities must support APRA in bespoke planning and pre-positioning to ensure that failures can be resolved in an orderly manner.
APRA chair John Lonsdale said CPS 190 and CPS 900 and their prudential practice guides will help promote the stability of the financial system in times of stress.
“The Australian financial system is one of the strongest and most resilient in the world, but as we’ve just seen internationally, sometimes crises occur and we need to be prepared,” Lonsdale said.
“In the unlikely event a bank, insurer, or superannuation fund got into difficulty, it would need to ensure it could recover or exit from the market in an orderly manner. Where an entity is unable to do this, APRA would take steps to resolve the entity safely in a manner that protects its depositors, policyholders, or members.”
APRA expects the new requirements and guidance for recovery planning to underpin existing expectations for insurers and banks, which have experience in the area. Meanwhile, superannuation trustees are expected to continue investing in crisis preparedness ahead of their formal requirement to comply with CPS 190 at the beginning of 2025.
APRA is also seeking feedback on amendments to the finalised reporting standards for insurance companies following the introduction of the Australian Accounting Standards Board 17 Insurance Contracts (AASB 17).
