insurance in Australia

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Australian Prudential Regulation Authority

The Australian Prudential Regulation Authority (APRA) is a statutory authority of the Australian Government responsible for regulating the Australian financial services industry. It was established on 1 July 1998 in response to the recommendations of the Wallis Inquiry. The authority and scope of APRA are defined by the Australian Prudential Regulation Authority Act, 1998.

APRA’s regulatory oversight extends to various sectors, including banks, credit unions, building societies, friendly societies, general insurance, health insurance, reinsurance, life insurance companies, and a significant portion of the superannuation industry.

Before the establishment of APRA, the Insurance and Superannuation Commission (ISC) was created on 23 November 1987, following the enactment of the Insurance and Superannuation Commissioner Act 1987. The ISC was formed by merging the Superannuation Division of Treasury, The Office of the General Insurance Commissioner, The Office of Life Insurance Commissioner, and The Office of the Australian Government Actuary. The commission had its headquarters at the Australian Automobile Association Building in Canberra and additional offices in Melbourne and Sydney. On 1 July 1998, the Insurance and Superannuation Commission was integrated into the Australian Prudential Regulation Authority.

In 2018, APRA introduced the restricted authorised deposit-taking institution (RADI) licensing framework to promote new entrants and enhance competition within the existing banking system.

Australian Prudential Regulation Authority

Australian Prudential Regulation Authority

Formed

Jurisdiction

Employees

Key document

Website

Four pillars policy

1 July 1998

Commonwealth of Australia

844 (2021–2022)

APRA Act, 1998 (Cth)

www.apra.gov.au

Go To

Regulatory Scope

Established on July 1, 1998, the Australian Prudential Regulation Authority (APRA) plays a pivotal role in overseeing a wide spectrum of financial institutions in Australia. Its purview extends to banks, credit unions, building societies, friendly societies, general insurance, health insurance, reinsurance, life insurance companies, and a significant portion of the superannuation industry. One of its primary objectives is to ensure that these institutions maintain financial stability and uphold their commitments to depositors, fund members, and policyholders. APRA diligently works to guarantee the financial soundness of these entities, enabling them to meet their obligations effectively.

Currently, APRA exercises supervision over institutions collectively managing assets valued at A$8.6 trillion, serving the financial interests of Australian depositors, policyholders, and superannuation fund members. To facilitate its critical functions, APRA relies on funding primarily generated through levies imposed on the financial institutions it supervises. Through rigorous oversight and regulatory measures, APRA plays a vital role in maintaining the integrity and stability of Australia’s financial services industry, ensuring that it continues to meet the highest standards of reliability and trustworthiness.

Former Agencies


  • Insurance and Superannuation Commission
  • Reserve Bank of Australia
  • Australian Financial Institutions Commission

Dissolved


  • Australian Prudential
  • Regulation Commission

Headquarters


1 Martin Place, Sydney, New South Wales

Minister Responsible


Jim Chalmers MP, Treasurer of Australia

Executives of statutory authority


  • John Lonsdale,
  • Chair Helen Rowell,
  • Deputy chair Margaret Cole,
  • Deputy chair Suzanne Smith,
  • Member  Therese
  • McCarthy Hockey,Member

Executive

APRA operates under the leadership of an Executive Group, which typically comprises four statutory appointees. The current Chairman of APRA is John Lonsdale, who provides strategic direction and oversight. Assisting him in this role, Helen Rowell and Margaret Cole serve as Deputy Chairs, contributing their expertise and guidance to APRA’s mission. The Executive Group further includes Suzanne Smith and Therese McCarthy Hockey as additional APRA Members, bringing a wealth of knowledge and experience to the organization.

John Lonsdale’s leadership as Chairman plays a pivotal role in shaping APRA’s policies and ensuring the stability and integrity of Australia’s financial services industry. As Deputy Chairs, Helen Rowell and Margaret Cole work alongside him to drive effective prudential regulation, safeguarding the interests of financial institutions and the broader community. Suzanne Smith and Therese McCarthy Hockey, as APRA Members, bolster the organization’s capabilities in fulfilling its mandate.

This cohesive leadership team collaborates to uphold APRA’s critical role in maintaining the strength, security, and resilience of Australia’s financial sector, ultimately contributing to the stability and confidence of the nation’s financial services industry.

No. Chair Start of term End of term Appointer Time in position
1 Jeffrey Carmichael 1 July 1998 30 June 2003 Peter Costello 5 years
2 John Laker 1 July 2003 30 June 2014 Peter Costello 11 years
3 Wayne Byers 1 July 2014 30 October 2022 Wayne Swan 8 years, 122 days
4 John Lonsdale 31 October 2022 incumbent Jim Chalmers 344 days

History

The Insurance and Superannuation Commission (ISC) was formally established on 23 November 1987, following the enactment of the Insurance and Superannuation Commissioner Act 1987. It was created by amalgamating entities such as the Superannuation Division of Treasury, The Office of the General Insurance Commissioner, The Office of the Life Insurance Commissioner, and The Office of the Australian Government Actuary. The commission’s headquarters were situated at the Australian Automobile Association Building in Canberra, with additional offices in Melbourne and Sydney. Subsequently, on 1 July 1998, the Insurance and Superannuation Commission was integrated into the Australian Prudential Regulation Authority (APRA).

In June 1996, the Financial System Inquiry, commonly known as the Wallis Inquiry, was initiated to assess the outcomes of deregulating the Australian financial system. The inquiry aimed to analyze the forces propelling further changes, particularly in technology, and make recommendations for regulatory reforms that would facilitate a more efficient, responsive, competitive, and flexible financial system, all while ensuring financial stability, prudence, integrity, and fairness.

Before the establishment of APRA in 1998, the regulatory framework for the Australian financial services industry was institution-based, not function-based. The key regulatory bodies were the Insurance and Superannuation Commission, the Reserve Bank of Australia, and the Australian Financial Institutions Commission (AFIC). The Wallis Inquiry called for a new regulatory structure.

This restructuring led to the Reserve Bank of Australia (RBA) focusing on monetary policy and systemic stability, while the Australian Prudential Regulation Commission (which later became APRA) was assigned the role of overseeing prudential regulation for authorized deposit-taking institutions (ADIs), life and general insurance, and superannuation, including Industry superannuation. Additionally, the Corporations and Financial Services Commission was renamed and expanded to become the Australian Securities and Investments Commission (ASIC), responsible for market integrity, consumer protection, and corporate regulation.

APRA officially came into existence on 1 July 1998, governed by the Australian Prudential Regulation Authority Act 1998. Over the years, APRA gained prominence for its involvement in significant events, such as the collapse of HIH Insurance in 2001 and its investigation into the National Australia Bank foreign currency deal scandal in 2004.

Furthermore, APRA assumed the role previously held by the Private Health Insurance Administration Council in July 2015. In 2018, the introduction of the restricted authorized deposit-taking institution (RADI) licensing framework was spearheaded by APRA to foster new market entrants and enhance competition within the existing banking system. However, the organization also faced scrutiny in 2018, with the Chair of the Productivity Commission, Peter Harris, raising concerns about APRA’s impact on limiting price competition in the banking sector. APRA representatives also appeared before the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry during that year.

Prudential Standards and Practice Guides

APRA plays a pivotal role in the Australian financial sector by setting and enforcing prudential standards that are mandatory for regulated entities. These standards are designed to ensure the stability, security, and integrity of the financial industry. In addition to these standards, APRA develops and maintains Prudential Practice Guides (PPGs), which serve as comprehensive guidelines outlining what APRA considers to be “sound practice.” These PPGs offer specific insights for various industries and also cover common areas relevant to most APRA-regulated entities, known as “cross-industry guides.”

While Prudential Practice Guides frequently touch upon statutory requirements outlined in legislation, regulations, or APRA’s prudential standards, it is essential to note that they do not independently create enforceable mandates. Instead, PPGs serve as valuable references that institutions can use to align their practices with APRA’s expectations and industry best practices.

By setting these guidelines and standards, APRA plays a crucial role in safeguarding the financial well-being of both institutions and consumers. It ensures that financial entities operate in a manner that mitigates risks and maintains the public’s trust in the stability of the financial sector. APRA’s ongoing commitment to promoting sound practices and overseeing regulatory compliance is integral to the overall health and resilience of the Australian financial services industry.

Common cross-industry standards and guidelines

Area Standard Practice Guide
110 – Internal Capital Adequacy Assessment Process and Supervisory Review   CPG 110 (March 2013)
220 – Risk Management CPS 220 CPG 220 (Apr 2018)
226 – Margining and Risk Mitigation for Non-centrally Cleared Derivatives CPS 226  
231 – Outsourcing CPS 231 CPG 231 (Oct 2006)
232 – Business Continuity Management CPS 232  
233 – Pandemic Planning   CPG 233 (May 2013)
234 – Information Security CPS 234 CPG 234 (Jun 2019)
235 – Managing Data Risk   CPG 235 (Sep 2013)
320 – Actuarial and Related Matters CPS 320 CPG 320 (Jul 2019)
510 – Governance CPS 510  
511 – Remuneration CPS 511 CPG 511 (Oct 2021)
520 – Fit and Proper CPS 520  

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