Australia Begins Consultation on Annuity Capital Settings

The Australian Prudential Regulation Authority (APRA) has announced plans to open a public consultation on the capital settings for annuity products in the second quarter of 2025.

This initiative is part of APRA’s Corporate Plan for 2024-25, which is designed to assist life insurers in broadening their range of retirement products.

A central proposal in the consultation will involve revising the calculation of the ‘illiquidity premium’ in the LPS 112 Capital Adequacy: Measurement of Capital. If certain risk controls are met, this could lead to a reduction in capital requirements for annuities.

APRA is calling for feedback from industry participants and stakeholders regarding the proposed adjustments.

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