The Australian Prudential Regulation Authority used a speech to private health insurance directors to reinforce expectations on risk management, long-term sustainability planning and board effectiveness, while noting the sector remains well capitalised but is entering a more challenging operating environment. APRA pointed to improving industry metrics including nearly 15 million Australians holding some form of private health insurance at end-September, net insurance margins returning to around 5 per cent, and investment earnings rising to almost 4 per cent of premium revenue in the 2024 financial year. Against that backdrop, it highlighted pressures from hospital and medical inflation of 6.7 per cent in the 2024 financial year versus headline inflation of 3.8 per cent, demographic ageing, household budget stress and escalating cyber risk. On governance and risk controls, APRA said it has been “underwhelmed” by the maturity of risk governance seen in the second round of triennial comprehensive reviews under Prudential Standard CPS 220 Risk Management, and reiterated that CPS 220 underpins CPS 230 Operational Risk Management (due to commence mid-2025) and complements CPS 234 Information Security; it also referenced its tripartite reviews identifying areas for uplift across many entities. On future preparedness, APRA said reviews of submitted plans under Prudential Standard CPS 190 Recovery and Exit Planning found insurers generally met requirements, but encouraged more detailed work on exit options. It also flagged that the Financial Accountability Regime extension to insurers in March 2025 will sharpen personal accountability for directors and senior executives, and that supervisors will increase their focus on governance this year alongside a forthcoming discussion paper proposing changes to APRA’s core governance prudential standards across all APRA-regulated industries.
Australian Prudential Regulation Authority 2025-02-04
Australian Prudential Regulation Authority highlights weak risk governance in private health insurers and signals increased board scrutiny
The Australian Prudential Regulation Authority (APRA) addressed private health insurance directors on risk management, sustainability, and board effectiveness. APRA noted industry improvements, with nearly 15 million Australians insured, net insurance margins at 5%, and investment earnings at 4% of premium revenue in 2024. However, it highlighted pressures from medical inflation, demographic ageing, and cyber risks. APRA expressed concerns over risk governance maturity under CPS 220 and its integration with CPS 230 and CPS 234. It urged insurers to enhance exit planning under CPS 190 and noted the upcoming Financial Accountability Regime extension in March 2025, increasing accountability for directors and executives. APRA plans to focus on governance and propose changes to its prudential standards.