The assets of superannuation funds are large and accounts for more than 20 percent of the total financial system assets, partly due to its compulsory nature in Australia. Most superannuation funds offer group life insurance cover for their members.
The IAIS ICPs apply to all insurers, whether private or government-controlled. Specific principles apply to the supervision of intermediaries.
Private Health Insurers are not included in the scope of this Technical Note.
10 selected ICPs are 2 (Supervisor), 9 (Supervisory Review and Reporting), 10 (Preventive and Corrective Measures), 14 (Valuation), 15 (Investment), 16 (ERM for Solvency Purposes), 17 (Capital Adequacy), 19 (Conduct of Business), 23 (Group-wide Supervisor), 24 (Macroprudential Surveillance and Insurance Supervision).
OnePath life (2nd largest life) which belonged to ANZ group has been acquired by Zurich Financial Group (Switzerland). The Colonial Mutual Life (4th largest life) which belonged to CBA group has been acquired by AIA group (Hong Kong). MLC (6th largest life) which belonged to NAB has been acquired by Nippon Life (Japan), with 80 percent of MLC shares held by Nippon Life and 20 percent retained by NAB.
The regulatory minimum ratio is 100 percent for both life and general insurers.
As those policies have long duration, some insurers still have to manage this legacy portfolio. For example, the largest insurer by asset has about 30 percent of its insurance liabilities from the legacy portfolio.
A bill enabling the appointment of a second Deputy Chairperson was introduced into Parliament on May 24, 2018. Subject to Parliamentary agreement and Royal Assent, a second Deputy will be appointed taking the number of members to four.
Treasurer is responsible for APRA issues.
However, this power has not been used in the past.
The SOE issued in 2014 described that “all information, briefing, press releases, and correspondence being provided to Ministers by APRA should be provided to the Secretary to the Treasury.”
APRA also invests heavily in training and development, such as for leadership program and secondments to other regulators. In addition, APRA’s travel budget incorporates provisions for on-site visits to insurers, including visits to offshore operations and attendance at supervisory colleges, as well as participation in international standard setting activities.
The Minister for Revenue and Financial Services is in charge of ASIC issues.
Liquidity premium is calibrated as 30 percent of A rated bond spread at a three-year maturity as published by the RBA and is only applicable to illiquid liabilities.
As of the end 2017, the difference reached A$11 billion at the industry wide level.
This include the exposures to the related parties.
Statutory fund is set at the insurance liabilities plus the corresponding capital to support the insurance liabilities, less any exposures to the counterparty in respect of asset classes with lower limits.
This capital relief applies only for policies where the policyholder bears the investment risk (i.e., investment linked policies) when there has been full disclosure to policyholders of the risks to which they are exposed.
The total assets of the life insurers were A$230 billion in the end of 2017. According to APRA, the majority of the assets are related to Unit trusts managed by the group asset manager.
Insurers have two options either (i) to look through their unit trust investment, or (ii) to treat the investment as an equity asset. However, if the unit trust is leveraged and unlisted, insurers have to look through the unit trust and calculate capital requirements as if they hold the underlying assets directly.
There is a capital charge associated with the credit risk of the counterparty default.
The board of the life insurer is required (s48 LIA) to give priority to the interests of policyholders over shareholders. This example would seem to involve a clear breach of that provision.
The life insurers and statutory funds must continue to meet their prudential requirements. There are level 1 requirements imposed on the life company. In addition, the level three framework requires groups to monitor intra-group exposures and set exposure limits. APRA can also impose license conditions to supplement these where necessary.
ASIC has been playing a leading role in the market conduct policy developments in the IAIS. Mr. Michael Saadat (Senior Executive Leader of Deposit-takers, Credit, and Insurers) is the chairman of the IAIS Market Conduct Working Group which has been producing a number of important studies, for example an issues paper on conduct of business and its management which was released in November 2015. The working group has also contributed to upcoming revision of ICP 18 (intermediaries) and 19 (conduct of business) standards and is currently working on an issues paper on the increasing use of digital technology in insurance business and its impact on fair consumer outcomes and conduct of business supervision.
For instance, it appears that the majority of revenue that is being paid to financial planners within the AMP network is derived from grandfathered commissions – Regan; T1150.32. See also Kotsopolous; Exhibit 2.11 at -.
Gap cover insurance is to help the policyholder (auto loan borrower) to pay back the outstanding auto loan balance in case of an accident or theft.