The Australian Prudential Regulation Authority (APRA) has published the findings of its review into the robustness of the general insurance industry’s approach to insurance risk management.
This followed the business interruption (BI) issues during the height of the COVID-19 pandemic where lockdowns and other restrictions triggered a spate of claims on BI policies. The legal uncertainty about whether cover applied, the significant potential financial exposure for insurers and the impact on consumers was substantial, and revealed weaknesses in how insurers managed their exposures.
In July 2021, APRA required 10 general insurers to undertake a self-assessment of the robustness of their risk frameworks in the context of BI and extend this assessment to other product lines that could also be vulnerable, including cyber risk. The self-assessments were completed in November 2021 and APRA has discussed the results with each participating insurer. In all cases, weaknesses were identified that needed addressing and rectification plans are now in place to make the necessary improvements.
Some of the findings from the exercise included:
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failure to update…
