The Australian Prudential Regulation Authority (APRA) has proposed to allow reduced capital requirements for annuity products in return for enhanced risk management by life insurers, including closer matching of assets and liabilities.
A statement issued by APRA said a consultation paper about modifying the capital framework for annuities is available on the APRA website and industry participants and relevant stakeholders are invited to send in written submissions in response to this paper by 25 July 2025.
While APRA does not expect the proposals to transform the market for annuities in Australia, they should facilitate more competitive pricing without unduly increasing risks for policyholders. The proposed changes address the call from industry to better align APRA’s requirements with other jurisdictions and to establish a more favourable environment for the potential growth of annuity products.
The proposed changes would allow reduced capital requirements for annuity products in return for enhanced risk management by life insurers, including closer matching of assets and liabilities. This should help life insurers to offer more competitively priced annuities without unduly increasing risks to policyholders.
The proposals respond to industry calls to better align APRA's requirements with those of other jurisdictions, creating a more favourable environment for the provision of annuity products. Over time this initiative has the potential to improve annuity offerings to Australian retirees.
The information paper is available on the APRA website at https://www.apra.gov.au/capital-settings-for-longevity-products