The Australian Prudential Regulation Authority continued to work with insurers and the government to address insurance affordability and availability last financial year, according to its annual report.
“Insurance premiums have been rising, and for some regions or product lines there have been significant increases or withdrawal of coverage,” the regulator says. “This is leading to inability for parts of the Australian community to access adequate insurance.”
It says severe weather, inflationary pressures and increasing reinsurance costs have added to the strain on insureds.
“All stakeholders, including insurers, governments, communities and regulators, have a role to play in reducing the underlying risks giving rise to the growing protection gap,” the 2023-24 report says.
Last March, the regulator began joint administration with the Australian Securities and Investments Commission of the Financial Accountability Regime, applying it first to banks, with insurers to follow next year.
APRA has also been working to improve financial system resilience, preparing regulated entities for the start of CPS 230 Operational Risk Management from July 1 next year.
“Material operational risk events and disruptions globally highlight the importance of the financial system’s resilience to such events,” the report says. “The increasing prevalence of third-party providers in operational disruptions impacting regulated entities is notable.”
CPS 230 aims to strengthen an entity’s resilience to operational risks and business disruption. The standard requires insurers to enhance third-party risk management, including underwriting agency partners and brokers.
“Incidents of cyberattacks, scams and tech outages featured strongly again in 2023-24, elevating the focus on operational risk management in boardrooms across all industries, including financial services,” APRA chair John Lonsdale says in the report.
“The standard … will ensure that regulated entities set and test controls and maintain business continuity plans to respond if disruptions occur.”
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