Australian Prudential Regulation Authority sets insurer readiness priorities as FAR commences and CPS 230 takes effect in July

The Australian Prudential Regulation Authority (APRA) published a speech setting out its “strategies for readiness” for insurers, using the response to Tropical Cyclone Alfred to reiterate supervisory expectations on governance, operational resilience and customer outcomes, and to flag key prudential regimes coming into force in 2025. The remarks noted early signs of proactive insurer engagement ahead of Alfred, against a backdrop of rising catastrophe frequency and claims volumes, and pointed to two APRA-led requirements aimed at strengthening resilience and accountability across general, life and health insurers. The Financial Accountability Regime (FAR) commences for insurers in March 2025, with APRA and the Australian Securities and Investments Commission highlighting lessons from banking implementation, including gaps in assigning prescribed responsibilities and insufficient consideration of general responsibilities and key functions. Prudential Standard CPS 230 Operational Risk Management takes effect in July 2025, with expectations spanning operational risk controls, the ability to maintain critical operations within tolerance through severe disruptions, credible business continuity planning, and stronger oversight of material service providers, including formal agreements and monitoring. The speech also highlighted consumer pressures from premium rises, called for clearer disclosure on coverage, pricing drivers and the effect of mitigation actions, and reiterated claims handling improvement areas previously identified by ASIC. APRA indicated it will provide further guidance on delegated underwriting later in 2025, and plans to publish its insurance Climate Vulnerability Assessment later in 2025, assessing how insurance affordability may evolve through to 2050 and where protection gaps could emerge.