A review of reinsurance capital requirements has moved to its next phase with the release of a response paper following a consultation last November.

The Australian Prudential Regulation Authority says it has refined some of its proposals for improving general insurers’ access to reinsurance.

“When APRA commenced this review, the reinsurance market was under significant pressure, prompting early proposals aimed at facilitating better access to alternative insurance,” the authority said. “Reinsurance market conditions have now eased, but APRA remains focused on future-proofing the prudential framework to ensure it supports insurers’ flexibility to access a broader range of reinsurance solutions. 

“These revised proposals are being considered with a view to supporting insurers when market conditions tighten again.”

The response paper calls for feedback on changes to reinstatement requirements; capital treatment of single peril reinsurance; reducing the need for APRA approval in certain reinsurance arrangements; and technical refinements and reporting updates.

The paper says the current requirement to have a reinstatement inhibits access to certain types of alternative reinsurance.

“Reinstatements are not commonly available for alternative forms of reinsurance such as catastrophe bonds. APRA is now proposing that a reinstatement should not be required where such arrangements are typically not available ... This proposal more effectively targets current aspects of the prudential framework that inhibit access to alternative reinsurance. The narrower scope of this proposal also reduces the risk of unintended consequences.”

The closing date for feedback is January 30.