The Australian Prudential Regulation Authority (APRA) has released a discussion paper describing its proposals to update the capital standards for general insurers and life insurers.

The proposed changes for general insurers ensure that all material types of risks, including asset/liability mismatch, asset concentration and operational risks, are adequately catered for within the capital standards.

Fundamental changes are proposed to the capital standards for life insurers. APRA proposes to simplify the current dual reporting requirements for solvency and capital adequacy and align the capital structure for life insurers more closely with the capital structure for authorised deposit-taking institutions and general insurers in Australia.

APRA expects to release draft capital standards by the end of 2010 and final capital standards in mid-2011, to take effect in 2012.