APRA proposes capital relief to boost annuity competitiveness

Life insurers would be allowed to hold reduced capital for annuity products.

The Australian Prudential Regulation Authority (APRA) has released a consultation paper proposing changes to the capital framework for annuities, aimed at improving the competitiveness of these products whilst maintaining policyholder protection.

Under the proposal, life insurers would be allowed to hold reduced capital for annuity products, provided they adopt stronger risk management practices, including better alignment between assets and liabilities. 

APRA expects this approach to enable more competitively priced annuities without increasing financial risks to consumers.

The initiative follows calls from the industry to bring APRA’s capital treatment for annuities closer in line with international standards. 

The changes are intended to support the growth of the annuity market in Australia and enhance retirement income options for retirees over time.

APRA is inviting feedback from industry participants and stakeholders, with written submissions due by 25 July.