Australian insurers will face new standards on risk management, reinsurance, risk transfer and actuarial issues under the Australian Prudential Regulation Authority’s insurance supervision reforms.

Following extensive consultation since APRA’s original Stage II prudential supervision of general insurance was released in November 2003, the regulator has made it clear that it expects the reforms to raise the standard of insurance industry practices.

The main thrust of the reforms will result in strengthened requirements for risk management, reinsurance management and outsourcing. Insurers will also be mandated to properly document and account for reinsurance contracts. They must also adhere to strict standards for the approval of limited risk transfer arrangements and will be required to have an approved actuary complete an annual financial condition report on each insurer and have a peer review undertaken of actuarial valuations of insurance liabilities.

Finally, CEO and CFO attestation of financial information provided to APRA, the approved auditor and approved actuary will be necessary.

Steve Somogyi, APRA member, said the reforms would implement several HIH Royal Commission recommendations and would guide the industry toward greater accountability.

Consultation on the proposals will run until 5 August, but observers do not expect much tweaking given that APRA has consulted widely on the issue.