Insurance Affordability and Cyber Risk Key Issues, APRA Chair Notes in Senate Committee Address
There were several insights for the insurance broking industry, as John Lonsdale, Chair, Australian Prudential Regulation Authority (APRA) appeared before the Senate Committee.
There were several insights for the insurance broking industry, as John Lonsdale, Chair, Australian Prudential Regulation Authority (APRA) appeared before the Senate Committee.
These included the work being done to support insurance affordability and availability, increase cyber security and minimise business disruption, and address future priorities of the regulator.
As part of its work with key stakeholders to address insurance affordability and availability pressures, APRA is assessing data to consider some of the issues associated with the protection gap in general insurance and finalising an APRA/ASIC joint review into premium increases in life insurance.
Other initiatives reported include APRA’s support of the Hazards Insurance Partnership to progress disaster risk reduction and natural hazard insurance and the new capital standards for the private health insurance industry, which came into effect in July 2023. This changed how capital adequacy is determined for insurers and has improved alignment with APRA’s insurance capital framework, consistent with international best practice.
APRA is aware of the volatile risks associated with cyber security and has an ongoing focus on countering cyber-attacks and improving business resilience.
“Our work to help our regulated cohort lift their defences and response capability – in line with the CPS 234 Information Security prudential standard – is ongoing,” Mr Lonsdale said.
“APRA has recently extended these efforts to help regulated entities better manage operational risks and respond to business disruptions. The new CPS 230 Operational Risk Management prudential standard will take effect in July 2025. It requires regulated entities to set and test operational risk management controls and improve business continuity planning to better prepare and respond to severe disruptions.”
APRA’s Future Plans
APRA released its latest Corporate Plan in August which includes current, emerging, and long-term challenges like climate and nature-related financial risks and an ageing population, and the work being undertaken in these areas.
Mr Lonsdale also noted the digitisation of financial services, which, alongside its benefits, has been shown to accelerate transmission shocks in the system.
“In response, APRA has begun developing the first system stress test to understand the system interconnections and to quantify, assess and respond to identified risks,” Mr Lonsdale said. “Strengthening governance is another area of focus in our ongoing work, including administering the Financial Accountability Regime (FAR), which comes into effect for insurers and superannuation trustees as of March 2025.”
In a review of its own capabilities to ensure it is future-ready, APRA is upgrading its technology and data systems and has made some internal structural changes to improve decision-making and efficiencies.