APRA vows to step in earlier

The Australian Prudential Regulation Authority intends to examine the financial health of around 3,000 companies over the next two years, stepping up its monitoring of the insurance industry in particular.

APRA has devised new guidelines which allow it to take control of any company in danger of collapse, and the authority's executive general manager, Tom Karp, vowed yesterday that there will be much more “tyre kicking, or drilling down” in future. A new system called Probability and Impact Rating System (PAIRS) will be used, and when a company is at risk of near-term failure APRA will move in to restructure and protect policyholders.

Mr Karp said the new PAIRS system marks a shift by APRA to supervision “out of the rear view” and the authority will now scrutinise companies for their ability to cope with “unexpected or extreme shocks”.