A few weeks ago, APRA released a new draft set of Prudential Standards for Life Insurance. They’re generally following the standards that were released for general insurers late last year. Basically, they require a life insurance company to have a risk management framework in place, which the guidance notes give suggestions about what should be included. A few quirks that have the industry talking:
“The Appointed Actuary must include an assessment of the suitability and adequacy of the Risk Management Framework as part of the Financial Condition Report”
Every life and general insurance company is required to have a Financial Condition Report provided to the Board once a year by the Appointed Actuary. It reports on everything to do with the financial condition of the company (capital, pricing, profitability, risks, etc). There’s some debate in the industry whether the Appointed Actuary is qualified to assess the full risk management framework. Market and Insurance risk? Most definitely. Operational risk? A bit trickier.
My own view is that actuaries can do it – risk management is part of our business – but it might be wise to make some training available to the life and general insurance actuaries who are going to be required to assess the whole framework.