The Australian Prudential Regulation Authority (APRA) has released a letter to general insurers on the use of alternative reinsurance arrangements, such as catastrophe bonds and other types of Insurance Linked Securities (ILS).
In the letter to industry, APRA reflects on the challenging reinsurance environment and reminds insurers that they can consider a range of reinsurance solutions including both traditional and ILS options under the prudential framework. Insurers considering ILS options should engage with APRA early.
APRA also intends to review the reinsurance settings in the prudential framework over the course of 2023 and the first half of 2024 to ensure reinsurance requirements remain fit-for-purpose.
The letter to industry is available on the APRA website at: APRA’s reinsurance requirements and the use of insurance linked securities.
