The Australian Prudential Regulation Authority has launched a follow-up consultation paper on proposed capital settings for longevity products.

In an initial paper in June, the authority flagged changes to the “illiquidity premium” – a key factor determining capital requirements for the products.

“Submissions were generally supportive of APRA’s direction,” the regulator said. “However, APRA received a range of suggestions to refine the proposal.

“In response to industry feedback, APRA is proposing a more principles-based approach to the illiquidity premium, including product eligibility under the revised framework.”

Stakeholders have until December 17 to provide feedback.

The authority is also seeking submissions on updated proposals for capital, longevity product pricing and incremental costs associated with implementing the reforms.

The Council of Australian Life Insurers says the planned changes “mark steady progress towards a more flexible and risk-sensitive system that supports innovation in retirement income streams”.

CEO Christine Cupitt said: “CALI values the constructive engagement with APRA throughout the consultation process.  

“We will continue working alongside regulators and stakeholders to ensure strong, sustainable retirement income streams that give Australians greater confidence, choice and long-term security.”

She says, at present, only one in three people feel confident they will have enough savings for retirement.

“As more Australians approach retirement, concerns about market volatility are increasing. Many are looking for stability and predictability, which makes lifetime income streams an attractive option.”

At an APRA roundtable last year, life insurers listed prudential regulation as one of several factors holding back the annuity market in Australia.