Numerous major and specialist Australian insurers will likely soon be beholden to increased regulations, according to a new KPMG report.
The Evolving Insurance Regulation report examines the increasing momentum behind efforts to harmonise insurance regulations across the globe, a key plank of which is identifying insurers of systemic importance and harnessing them with stricter regulations.
KPMG Australia Insurance Risk Lead Rob Curtis says although the specific insurers to be affected have not yet been identified, there are likely to be several.
“Our expectation would be that the major and highly specialised Australian insurers are likely to be captured,” he says.
“These insurers may be required to hold higher levels of capital in addition to undertaking recovery and resolution plans, in line with the approach for the banking sector, which focused on the need for higher loss absorbency and recapitalisation capacity.”
Curtis says the international focus comes as Australian regulators take on a more proactive regulatory approach.
“This increased focus on consumer outcomes means that regulators such as ASIC and APRA are not just interested in the control environment, but also in firms’ business models and strategies – for example, consideration of key drivers of profit and whether consumers are being treated fairly in the sale of these products,” he says.
“We expect to see a considerable increase in such focus over the next 12 months from the Australian regulators, particularly the drivers of conduct risk which will place further pressure on senior executives and management to respond accordingly.”
To view the full report, click here.