The Australian Prudential Regulation Authority has published final amendments to its prudential standards on the capital treatment of longevity products, including annuities, updating how insurers can determine capital requirements for long-term retirement income liabilities. The reforms introduce an option to use an Advanced Illiquidity Premium (AILP) in capital calculations while retaining additional prudential safeguards. To support the AILP option, the package adds risk controls covering governance, reporting and the asset composition of portfolios where the AILP is applied. APRA describes the changes as a more risk-sensitive, principles-based approach that reduces procyclicality in capital settings and better aligns capital requirements with the long-dated nature of longevity liabilities, following two rounds of industry consultation. The amended prudential standards take effect on 1 July 2026. APRA has also released a reporting template for insurers that choose to use the AILP and is seeking feedback on the template by 12 May 2026.
Australian Prudential Regulation Authority 2026-03-31
Australian Prudential Regulation Authority finalises longevity product capital reforms introducing an Advanced Illiquidity Premium option effective 1 July 2026
The Australian Prudential Regulation Authority has finalised amendments to its prudential standards on the capital treatment of longevity products, introducing an option for insurers to use an Advanced Illiquidity Premium in capital calculations with additional prudential safeguards. The package adds governance, reporting and asset composition risk controls for portfolios using the Advanced Illiquidity Premium and is intended to deliver a more risk-sensitive, principles-based and less procyclical capital framework aligned with long-dated retirement income liabilities.