Australia opens consultation for annuity products capital settings

The key proposal will modify the calculation of the ‘illiquidity premium’.

The Australian Prudential Regulation Authority (APRA) will initiate a public consultation on capital settings for annuity products in the second quarter of 2025. 

The move is part of APRA’s Corporate Plan 2024-25, which aims to support life insurers in expanding retirement product offerings.

The key proposal will modify the calculation of the ‘illiquidity premium’ in LPS 112 Capital Adequacy: Measurement of Capital, potentially reducing capital requirements for annuities if specific risk controls are met. 

APRA will seek feedback from industry participants and stakeholders on the proposed changes.