APRA letter outlines cyclonic pool treatment – Regulation & Government – Insurance News

APRA letter outlines cyclonic pool treatment

May 2, 2022

The Australian Prudential Regulation Authority (APRA) has written to general insurers about its plans to clarify the capital implications of the new government-backed cyclone reinsurance pool.

APRA has published draft amendments to four prudential standards, with comments sought by June 1, ahead of the scheduled July 1 start of the reinsurance program.

The changes include changing the definition of an APRA-registered reinsurer to include the Australian Reinsurance Pool Corporation, which will administer the pool.

The cyclone pool is backed by a $10 billion government guarantee, while a mechanism also provides for an increase in the cap, if necessary, to ensure that all obligations are met.

The changes to the prudential standards aim to clarify the treatment of reinsurance capital within the pool so that it is not treated differently from a highly rated APRA-registered reinsurer.

“The proposed changes ensure that reinsurance recoveries are not subject to a capital requirement in recognition of the Australian government’s ARPC guarantee and aim to reduce the burden where applicable,” says Helen Rowell, Vice President of APRA, in the letter.

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