Prateek Vijayvergia, business leader for key accounts at Xceedance in Australia, has cast a spotlight on the need for insurers and underwriting agencies to gear up for a regulatory evolution poised to reshape the landscape in 2024 and 2025.
The call to action comes against the backdrop of the Australian Prudential Regulation Authority’s (APRA) decision to tighten its supervisory grip with a series of impending regulatory updates aimed at bolstering the industry’s compliance framework.
In a detailed exposition to the Senate Economics Legislation Committee of the Federal Parliament on February 14, APRA chair John Lonsdale laid out the regulator’s strategic focus for 2024. The strategy zeroes in on reinforcing operational and cyber resilience within the insurance sector, acknowledging the increasing dependency on digital infrastructure.
Part of this regulatory shift is the introduction of Prudential Standard CPS 230 – Operational Risk Management, scheduled to take effect on July 1, 2025.
Lonsdale emphasised that insurance entities must navigate operational risks and sustain critical functionalities during disruptions.
“Entities must understand and manage their operational risks and be able to maintain critical operations for customers through business disruptions,” he said. “APRA seeks to ensure all regulated entities operate with strong control frameworks, effective business continuity plans, and only rely on service providers where they are confident robust arrangements are in place.”
Highlighting the operational changes requisite for CPS 230 compliance, Vijayvergia pointed to the need for contract revisions, an intensified focus on business continuity planning, meticulous evaluation of new projects, and enhanced transparency in subcontracting practices.
“Regulated entities must question their readiness as CPS 230’s implementation date fast approaches,” he said. “There’s a lot of work to be done to ensure compliance, so advance preparation is vital. APRA expects material service providers and critical operations to be identified by mid-2024. Tolerance levels must be set by year end. Insurers and underwriting agencies must budget for the changes required and develop capability to use tools and technology to enable them to manage compliance requirements cost effectively.”
The impending rollout of the Financial Accountability Regime (FAR) in March 2025 aims to enhance accountability across all APRA-regulated entities.
Vijayvergia recommends that insurers and agencies prioritise change management as a key competency.
“The upward trajectory for regulatory reform will continue and the industry must make managing change a core competency,” he said.
