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Australian Life Insurers should check their risk management frameworks

Friday 30 July 2021




Recently, the Australian Prudential Risk Authority (APRA) has called on a number of general insurers to check their risk management frameworks.

The prudential regulator is calling on insurers to
complete self-assessments on their risk management frameworks the by the 30 November. 

This call from the regulator because of issues with business interruption insurance. 

 APRA Deputy Chair Helen Rowell said in an official statement, “Insurers are in the business of managing risk, yet the impact of the pandemic has raised clear concerns about how well some insurers are doing this. Although the legal disputes around BI cover for some COVID-19 claims have yet to be fully resolved, the fact that so many insurers were selling policies with outdated wording exposes clear deficiencies in risk management.”

The Deputy Chair said that that the self-assessments will reveal whether further action would be required. 

The self-assessment has been divided into three separate sections asking the business to look at their insurance risk framework, assess whether it appropriate and in the context of business interruption and what improvements can be made. 

Then the businesses need to look at the extent the insurance risk management would be effective in managing the BI and the regulator asking for there to be a special focus on silent cyber exposure across their product line and cyber products. 

And finally, “To provide an appropriate level of assurance on the self-assessment, ABC’s internal audit function is to review and attest as to the adequacy and robustness of the process undertaken to arrive at the findings of the assessment.”

The board is expected to endorse the self-assessment and then the demonstrate how they are confident in the process comprehensive and performed to a high degree.