The Australian Prudential Regulation Authority confirmed it will proceed with a public consultation on capital settings for annuity products, centred on a proposed change that would lower life insurers’ capital requirements for annuities. The key proposal is to revise the approach to calculating the illiquidity premium in LPS 112 Capital Adequacy: Measurement of Capital, with the reduced capital requirement conditional on certain risk controls being in place. The consultation package will be released in the second quarter of 2025 and will invite feedback from industry and broader stakeholder groups. APRA positioned the work as supporting greater availability of retirement products for retirees, and referenced its July 2024 industry roundtable note for related engagement and discussion of demand and supply factors affecting the Australian annuities market.
Australian Prudential Regulation Authority 2025-02-27
Australian Prudential Regulation Authority confirms consultation on annuity capital settings including a revised illiquidity premium to lower capital requirements
The Australian Prudential Regulation Authority will launch a public consultation in Q2 2025 on revising capital settings for annuity products, proposing reduced capital requirements for life insurers contingent on specific risk controls. This initiative aims to enhance the availability of retirement products, following discussions from a July 2024 industry roundtable.