The Australian Prudential Regulation Authority (APRA) has opened a second phase of consultations on proposed revisions to its capital requirements for longevity products, such as annuities.
The regulator’s initiative is intended to support the evolution of retirement income offerings in Australia, while maintaining safeguards for policyholders.
APRA’s latest consultation follows an initial round in June, when the authority circulated draft changes to the capital framework for life insurers.
Industry responses to that consultation have led APRA to refine its proposals, including a move toward a more principles-based approach in setting capital requirements for longevity products.
According to APRA, the revised proposals are designed to balance financial system stability with efficiency, aiming to encourage both resilience and innovation within the insurance sector.
The regulator has stated that these adjustments are intended to facilitate the growth and competitive pricing of longevity-linked products, which are expected to play a growing role in meeting the needs of Australia’s ageing population.
A detailed response paper, “Adjustments to the capital settings for longevity products,” is available on APRA’s website.
The authority is accepting feedback on the draft prudential standards until Dec. 17.
Supporting documents, including draft standards and non-confidential submissions, can be accessed via APRA’s consultation page.
The proposed changes have drawn responses from key industry stakeholders.
In July, TAL group CEO and managing director Fiona Macgregor commented on the direction of the reforms.
“Evolving Australia’s capital settings for retirement income solutions, alongside advice reform and product innovation, will help more Australians retire with confidence,” she said.
Macgregor also noted the significance of maintaining a regulatory environment that attracts long-term capital to retirement income products.
“We look forward to working with APRA, our superannuation fund partners, and industry stakeholders to ensure these reforms bring lasting benefits to retirees,” she said.
The Financial Services Council (FSC) has also provided input, welcoming the opportunity to comment on APRA’s information paper.
The FSC supports the overall direction of the proposed reforms, which are aimed at fostering a more competitive and sustainable market for annuities and other longevity-linked products.
It highlighted that these changes are particularly relevant given the Retirement Income Covenant, which has increased focus on improving retirement outcomes for superannuation fund members.
The FSC observed that the current retirement income market is dominated by account-based pension products, but the proposed capital framework could encourage greater diversity and innovation in retirement income solutions.
According to the FSC, expanding the range of available products could help address gaps in the retirement phase and provide consumers with more options for managing longevity risk.
The council also emphasised the need for APRA’s final framework to balance prudential soundness with the flexibility required for innovation.
APRA will consider the feedback received during this consultation period before finalising the capital framework for longevity products.
The regulator has indicated its intention to continue working with industry participants to ensure the new framework supports both consumer protection and the development of innovative retirement income products.
