The Australian Prudential Regulation Authority (APRA) has initiated a process to modernise its prudential architecture by discontinuing two outdated Prudential Practice Guides (PPGs) related to the risk management framework for general and life insurers.
The decision to retire both Prudential Practice Guide GPG 250 Balance Sheet and Market Risk (GPG 250) and Prudential Practice Guide LPG 250 Asset and Liability Management Risk (LPG 250) aligns with APRA’s strategic initiative, as outlined in its 2023-24 Corporate Plan. The Modernising the Prudential Architecture (MPA) initiative aims to enhance the clarity, simplicity, and adaptability of the prudential framework.
A key focus of the MPA is refining prudential guidance to ensure its relevance and currency. APRA is actively identifying and retiring outdated PPGs that no longer contribute meaningful value to understanding current prudential requirements.
The PPGs marked for retirement, GPG 250 and LPG 250, were introduced in 2006 and 2007, respectively, to offer high-level guidance on elements typically included in a risk management framework.
While these guides served their initial purpose by explaining fundamental concepts to uplift industry practices, APRA confirmed in its recent letter to general and life insurers that the guides are now unnecessary.
APRA’s expectations regarding risk management, including those covered in GPG 250 and LPG 250, are detailed in Prudential Standard CPS 220 Risk Management (CPS 220).
Last revised in July 2019, CPS 220 applies to all APRA-regulated institutions, mandating the maintenance of a risk management framework appropriate to the institution’s size, business mix, and complexity. The framework must address various material risks, as specified in CPS 220, and is supported by Prudential Practice Guide CPG 220 Risk Management.
With these comprehensive guidelines in place, APRA has determined that GPG 250 and LPG 250 are no longer necessary, prompting their immediate retirement. As part of ongoing efforts within the MPA, APRA states that it remains committed to identifying opportunities for simplification and harmonisation within the prudential framework.
