The Australian Prudential Regulation Authority (APRA) has released a discussion paper outlining its plan to align APRA’s insurance capital and reporting frameworks with new accounting standard AASB 17, which is set to take effect in January 2023.
AASB 17, or the Australian Accounting Standards Board 17 Insurance Contracts, was originally slated for a January 2021 effective date, but was deferred by the board to ease the transition. In the meantime, APRA is conducting a consultation to update its frameworks for life, general, and private health insurance.
“A failure to update the frameworks in a timely manner would create a divergence between the new accounting standard and APRA’s frameworks, resulting in insurers needing to maintain dual valuation, actuarial, accounting, and reporting systems,” said APRA executive board member Geoff Summerhayes.
“This would lead to significant regulatory burden with potential for those costs to be passed on to policyholders. Industry has also consistently expressed its desire for early direction from APRA on how the capital and reporting frameworks are likely to change as a result of AASB 17.”
APRA’s consultation on the discussion paper will run until the end of March 2021, after which the regulator is expected to release updated capital and reporting standards later that year. It was noted that a further consultation will be conducted prior to the July 2023 implementation of the final frameworks.