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APRA looking for 'protection gap' answers

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The Australian Prudential Regulation Authority (APRA) says insurance accessibility and affordability challenges for parts of the community are likely to be exacerbated by increases in the frequency and severity of natural catastrophes, and the issue is a key focus.

“APRA intends to devote greater regulatory attention to these challenges by working closely with Government, industry and regulatory peers to help address this protection gap,” it says in its annual report.

The regulator says it has also established an Insurance Consumer Forum, which has started meeting twice yearly to share ideas, insights and recommendations on the challenges.

The general insurance industry remains well capitalised with a cover ratio of 1.7 times the minimum requirement as at June 30, the regulator says.

The ratio benefitted from capital raising by some insurers to offset the need for additional business interruption claim provisions but it was adversely affected by higher-than-expected claims costs from weather disasters.

APRA says business interruption insurance loss exposures and strengthening of risk management frameworks, including for other lines, are key areas of ongoing supervisory focus following the “imprecision in policy wording” that led to legal actions over the past year.