Risk Regulatory Update

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APRA remakes life insurance standards without amendments

After consultation, the Australian Prudential Regulation Authority (APRA) is remaking four life insurance prudential standards that were due to expire on 1 April 2023, without amendments.

The life insurance prudential standards consulted on include:

  • Prudential Standard LPS 100 Solvency Standard (LPS 100)

  • Prudential Standard LPS 115 Capital Adequacy: Insurance Risk Charge (LPS 115)

  • Prudential Standard LPS 360 Termination Values, Minimum Surrender Values and Paid up Values (LPS 360)

  • Prudential Standard LPS 370 Cost of Investment Performance Guarantees (LPS 370)

New CSLR and FAR legislation enters parliament

Legislation on the Compensation Scheme of Last Resort (CSLR) and the Financial Accountability Regime (FAR) have been introduced into parliament to commence set-up. The proposal was started as part of the Financial Services Royal Commission.

The CSLR is to allow compensation to be paid to a consumer where a determination issued by the disputes resolution team at the Australian Financial Complaints Authority (AFCA) remains unpaid, as it relates to a financial product or service that is part of the scheme.

The government will pay for the scheme to be set up, with a levy on the industry to fund it ongoing.

The Financial Accountability Regime introduces accountability for the banking, insurance and superannuation industries. The regime supports improved risk and governance culture in financial institutions by using a responsibility and accountability framework for the companies and their senior executives.

Levy proposes scrapping SOAs

Michelle Levy, leader of the government’s review of financial advice, the Quality of Advice Review, is suggesting that statement of advice documents be scrapped.

SOAs would be replaced by a requirement by providers of personal advice to retail clients to keep complete records of the advice offered, and provide written advice where the client requests in writing.

Votes are in: FPA and AFA will now be the Financial Advice Association of Australia

Members of Australia’s two biggest financial advisory associations have voted to merge, with the new entity to be called the Financial Advice Association of Australia (FAA). About 3,000 members voted overwhelmingly in favour of the merger.

The Association of Financial Advisers (AFA) and the Financial Planning Association of Australia (FPA) have been separated by idealogical barriers of members, and have finally come together as a united voice for the industry.

The new entity will be joined by members from May 2023, and membership is likely to sit at around 13,000 if current membership is anything to go by.