The Australian Prudential Regulation Authority (APRA) has completed its amendments to the prudential framework for general insurers to support the government's cyclone and related flood damage reinsurance pool, following its consultation in April 2022.

The reinsurance pool will be administered by the Australian Reinsurance Pool Corporation (ARPC) beginning on July 1. It is expected to reduce insurance premiums by up to $2.9 billion for over 880,000 eligible household, strata, and small business insurance policies in northern Australia.

In a letter to the industry, APRA confirmed it had finalised the changes to prudential standards:

• GPS 001 Definitions (GPS 001);
• GPS 114 Capital Adequacy: Asset Risk Charge (GPS 114);
• GPS 116 Capital Adequacy: Insurance Concentration Risk Charge (GPS 116); and
• GPS 117 Capital Adequacy: Asset Concentration Risk Charge (GPS 117).

Read more: APRA proposes changes to general insurance reporting standards

APRA explained that the changes were necessary to support the reinsurance pool's operation and clarify the requirements under its prudential framework.

In a previous letter, the regulator said modernising the prudential structure is necessary to make the prudential standards and guidance more accessible for the industry, more adaptable to cater to new risks and new entrants, and better align to users' needs.

“Proportionality is one initiative that supports these objectives,” APRA wrote in the letter.