The Australian Prudential Regulation Authority (APRA) has published the findings of its review into the general insurance industry's approach to insurance risk management following the emergence of business interruption (BI) issues during the COVID-19 pandemic.
For the review, APRA required 10 insurers to conduct a self-assessment against the robustness of their risk frameworks in the context of BI and to extend the assessment to other product lines that most likely become vulnerable, including cyber risk. In all cases, the insurers found weaknesses that required remediation and have implemented programs to address them.
The review found:
APRA deputy chair Helen Rowell said comprehensive remediation plans were being undertaken to remedy the issues found in the review. She said: “The self-assessment exercise affirmed APRA's view that insurers took their eye off the ball of sound insurance risk management.
“While the legal uncertainty has largely abated in recent weeks, the BI issue was a near miss for insurers and one which cannot afford to be repeated. APRA expects all insurers and reinsurers to review their approach to risk management in light of these findings, and we are determined to ensure the various remediation plans of the 10 insurers involved are fully implemented.”
APRA sent a letter outlining the review's key findings and its ongoing supervisory focus on insurance risk management to its regulated general insurers.