On 22 June 2015, the Australian Prudential Regulation Authority (APRA) released a letter to all Chief Executive Officers (CEOs) of general insurers, Level 2 insurance groups and life companies (collectively, the insurers) encouraging them to adopt better public disclosure practices for prudential matters.
The current capital adequacy framework for insurers is based on a three pillar approach, the third pillar being disclosure requirements. APRA currently requires insurers to disclose to the public its capital base, prescribed capital amount and their respective components. However, APRA has observed that the public disclosure practices adopted by a number of insurers in Australia are lagging behind the industry’s better practice.
APRA has identified a few practical approaches that may assist insurers in enhancing their public disclosure practices. Insurers are specifically asked to consider:
- making their existing reporting documents to regulators publicly available – this includes financial, directors’ and auditors’ reports;
- providing qualitative disclosures that make financial disclosures more meaningful;
- enhancing their financial disclosures through providing key performance statistics and analysis of profit and loss at different classes of business in addition to overall aggregate results;
- improving corporate governance, remuneration and risk management disclosures by providing information on matters such as the experience and qualifications of individual board members or senior staff; or how an insurer’s risk appetite is incorporated into business decision making in practice;
- adopting appropriate platforms for making public disclosures for prudential purposes to ensure that the information is readily and freely available; and
- what information is appropriate and not appropriate to release into the public domain.
APRA has not imposed additional compulsory disclosure requirements on insurers at this stage but has strongly encouraged insurers to consider its recommendations to improve public disclosure practices for prudential purposes.