{"id":"F2006L01459","name":"Life Insurance (prudential standard) determination No. 2 of 2006 - Prudential Standard LPS 510 - Governance","slug":"life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":59077,"registerId":"commonwealth-F2006L01459-current","compilationNumber":null,"startDate":"2026-04-02","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Prudential Standard LPS 510","sectionType":"part","heading":"Prudential Standard LPS 510","content":"# ![](image.001.png)\n\n# Prudential Standard LPS 510\n\n## Governance\n\n| Objectives and key requirements of this Prudential StandardThe ultimate responsibility for the sound and prudent management of life companies rests with their Board of directors. It is essential that life companies have a sound governance framework and conduct their affairs with a high degree of integrity.A culture that promotes good governance is of benefit to all stakeholders of a life company and helps to maintain public confidence in the institution.This Prudential Standard sets out minimum foundations for good governance of life companies. It aims to ensure that life companies are managed in a sound and prudent manner by a competent Board of directors, which is capable of making reasonable and impartial business judgements in the best interests of the life company and which gives due consideration to the impact of its decisions on policyholders.The governance arrangements of life companies build on these foundations in ways that take account of the size, complexity and risk profile of the institution.The key requirements of this Prudential Standard include:specific requirements with respect to Board size and composition;the chairperson of the Board must be an independent director;an Audit Committee must be established;life companies must have a dedicated internal audit function;certain provisions dealing with independence requirements for auditors consistent with those in the Corporations Act 2001; andthe Board must have a policy on Board renewal and procedures for assessing Board performance.A number of requirements also apply to eligible foreign life insurance companies. |\n| -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |","sortOrder":0},{"sectionNumber":"Governance","sectionType":"part","heading":"Governance","content":"## Governance\n\n| Objectives and key requirements of this Prudential StandardThe ultimate responsibility for the sound and prudent management of life companies rests with their Board of directors. It is essential that life companies have a sound governance framework and conduct their affairs with a high degree of integrity.A culture that promotes good governance is of benefit to all stakeholders of a life company and helps to maintain public confidence in the institution.This Prudential Standard sets out minimum foundations for good governance of life companies. It aims to ensure that life companies are managed in a sound and prudent manner by a competent Board of directors, which is capable of making reasonable and impartial business judgements in the best interests of the life company and which gives due consideration to the impact of its decisions on policyholders.The governance arrangements of life companies build on these foundations in ways that take account of the size, complexity and risk profile of the institution.The key requirements of this Prudential Standard include:specific requirements with respect to Board size and composition;the chairperson of the Board must be an independent director;an Audit Committee must be established;life companies must have a dedicated internal audit function;certain provisions dealing with independence requirements for auditors consistent with those in the Corporations Act 2001; andthe Board must have a policy on Board renewal and procedures for assessing Board performance.A number of requirements also apply to eligible foreign life insurance companies. |\n| -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |","sortOrder":1},{"sectionNumber":"The key requirements of this Prudential ","sectionType":"section","heading":"The key requirements of this Prudential Standard include:","content":"##### The key requirements of this Prudential Standard include:\n\n-   specific requirements with respect to Board size and composition;\n-   the chairperson of the Board must be an independent director;\n-   an Audit Committee must be established;\n-   life companies must have a dedicated internal audit function;\n-   certain provisions dealing with independence requirements for auditors consistent with those in the Corporations Act 2001; and\n-   the Board must have a policy on Board renewal and procedures for assessing Board performance.\n\nA number of requirements also apply to eligible foreign life insurance companies.","sortOrder":2},{"sectionNumber":"Authority","sectionType":"division","heading":"Authority","content":"### Authority\n\n1.  This Prudential Standard, made under s230A of the Life Insurance Act 1995 (Life Insurance Act), applies to all life companies authorised under the Life Insurance Act.","sortOrder":3},{"sectionNumber":"Application","sectionType":"division","heading":"Application","content":"### Application\n\n2. All life companies (except eligible foreign life insurance companies[\\[1\\]](#_ftn1)) have to comply with this Prudential Standard in its entirety.\n\n3. Eligible foreign life insurance companies (EFLICs) have to comply with only those provisions of this Prudential Standard which specifically indicate that they apply to EFLICs. The obligations imposed by this Prudential Standard, on or in relation to an EFLIC, only apply in relation to its Australian business. Attachment B to this Prudential Standard applies specifically to EFLICs.","sortOrder":4},{"sectionNumber":"The Board and senior management","sectionType":"division","heading":"The Board and senior management","content":"### The Board and senior management\n\n4. The Board of directors (the Board) of a life company is ultimately responsible for the sound and prudent management of the life company. This Prudential Standard sets out the minimum requirements that a life company must meet in the interests of promoting strong and effective governance.\n\n5. The Board of a life company must have a formal charter that sets out the roles and responsibilities of the Board.\n\n6. The Board, in fulfilling its functions, may delegate authority to management to act on behalf of the Board with respect to certain matters, as decided by the Board. This delegation of authority must be clearly set out and documented. The Board must have mechanisms in place for monitoring the exercise of delegated authority. The Board cannot abrogate its responsibility for functions delegated to management.\n\n7. The Board must ensure that directors and senior management of the life company, collectively, have the full range of skills needed for the effective and prudent operation of the life company, and that each director has skills that allow them to make an effective contribution to Board deliberations and processes. This includes the requirement for directors, collectively, to have the necessary skills, knowledge and experience to understand the risks of the life company, including its legal and prudential obligations, and to ensure that the life company is managed in an appropriate way taking into account these risks. This does not preclude the Board from supplementing its skills and knowledge through the use of external consultants and experts.\n\n8. Senior management of the life company (and senior management of an EFLIC), with responsibilities relating to the business in Australia, must be ordinarily resident in Australia.\n\n9. Members of the Board and senior management (and senior management of the EFLIC) must be available to meet with APRA on request.\n\n10. The Board must provide the external auditor[\\[2\\]](#_ftn2) and the Appointed Actuary of the life company with the opportunity to raise matters directly with the Board (the Compliance Committee for an EFLIC[\\[3\\]](#_ftn3)).","sortOrder":5},{"sectionNumber":"Independence","sectionType":"division","heading":"Independence","content":"### Independence\n\n11. For the purposes of this Prudential Standard, an independent director is a non-executive director who is free from any business or other association – including those arising out of a substantial shareholding, involvement in past management or as a supplier, customer or adviser – that could materially interfere with the exercise of their independent judgement. In assessing whether a director is independent, the Board must apply the definition set out in the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (Attachment A).\n\n12. If the Board of a life company is in doubt regarding a director’s independence, the life company may refer the matter to APRA for guidance.","sortOrder":6},{"sectionNumber":"Definition of non-executive director","sectionType":"division","heading":"Definition of non-executive director","content":"### Definition of non-executive director\n\n13. For the purposes of this Prudential Standard a reference to “non-executive” director is to be interpreted as meaning a director who is not a member of management.","sortOrder":7},{"sectionNumber":"Board composition","sectionType":"division","heading":"Board composition","content":"### Board composition\n\n14. The Board of a life company must have a minimum of five directors at all times.\n\n15. The Board must have a majority of independent directors at all times. For life companies that are subsidiaries[\\[4\\]](#_ftn4) of other APRA-regulated institutions or overseas equivalents,[\\[5\\]](#_ftn5) exceptions may apply as set out at paragraphs 24 to 26. For life companies that are subsidiaries of a parent company that is not prudentially regulated exceptions may apply as set out at paragraph 27.\n\n16. The chairperson of the Board must be an independent director of the life company.\n\n17. A majority of directors present and eligible to vote at all Board meetings must be non-executives.\n\n18. The chairperson of the Board cannot have been the Chief Executive Officer (CEO) of the life company at any time during the previous three years. If the position of the CEO is unexpectedly vacated, the chairperson may serve as an interim CEO. After a period of 90 days, approval must be sought from APRA to allow this arrangement to continue.\n\n19. The chairperson must be available to meet with APRA on request.\n\n20. For locally\\-owned and incorporated life companies, a majority of directors must be ordinarily resident in Australia.\n\n21. For foreign-owned locally incorporated life companies at least two of the directors of the life company must be ordinarily resident in Australia, at least one of whom must also be independent.\n\n22. Board representation must be consistent with a life company’s shareholding. Where a shareholding constitutes not more than 15% of a life company’s voting shares there should not be more than one Board member who is an associate of the shareholder where the Board has up to six directors, and not more than two Board members who are associates of the shareholder where the Board has seven or more directors. A director is taken to be an associate of a shareholder for the purposes of this clause, if the director is an “associate” of the shareholder, or the shareholder is an “associate” of the director, according to the definition of “associate” in clause 4 of Schedule 1 of the Financial Sector (Shareholdings) Act 1998. That definition is to be applied for the purposes of this clause as if subparagraph (1)(l) of that definition were omitted.\n\n23. Where an individual shareholding is greater than 15%, as approved under the Financial Sector (Shareholdings) Act 1998, the Board representation of that shareholding can be greater than allowed in paragraph 22, although it must still be broadly proportionate to the shareholding concerned.[\\[6\\]](#_ftn6)","sortOrder":8},{"sectionNumber":"Life companies that are subsidiaries of ","sectionType":"division","heading":"Life companies that are subsidiaries of other APRA-regulated institutions or overseas equivalents","content":"### Life companies that are subsidiaries of other APRA-regulated institutions or overseas equivalents\n\n24. For a life company that is a subsidiary of another APRA-regulated institution or an overseas equivalent, the Board of the life company must have a majority of non-executive directors, but these non-executive directors need not all be independent. They can include Board members or senior management of the parent company or its subsidiaries, but not executives of the life company or its subsidiaries.\n\n25. A life company to which paragraph 24 applies will be required to have, at a minimum, two independent directors, in addition to an independent chairperson, where the Board has up to seven members. Where the Board has more than seven members, the life company will be required to have at least three independent directors, in addition to an independent chairperson.\n\n26. For the purposes of meeting the requirements in paragraph 25, the independent directors on the Board of the parent company or its other subsidiaries can also sit as independent directors on the Board of the life company.","sortOrder":9},{"sectionNumber":"Subsidiaries with a parent that is not p","sectionType":"division","heading":"Subsidiaries with a parent that is not prudentially regulated","content":"### Subsidiaries with a parent that is not prudentially regulated\n\n27. For a life company that is a subsidiary of another entity, not covered by the arrangements in paragraphs 24 to 26 of this Prudential Standard, the Board must have a majority of independent directors. However, independent directors on the Board of the parent company or its other subsidiaries can also sit as independent directors on the Board of the life company.","sortOrder":10},{"sectionNumber":"Life companies that are part of a corpor","sectionType":"division","heading":"Life companies that are part of a corporate group","content":"### Life companies that are part of a corporate group\n\n28. Where a life company is part of a corporate group[\\[7\\]](#_ftn7) (group), and the life company utilises group policies or functions, the Board of the life company must ensure that these policies and functions give appropriate regard to the life company’s business and its specific requirements.","sortOrder":11},{"sectionNumber":"Joint ventures","sectionType":"division","heading":"Joint ventures","content":"### Joint ventures\n\n29. For the purposes of this Prudential Standard, a life company that operates as a joint venture can be considered as part of the group of each parent entity. Independent directors of a parent can sit as independent directors on the Board of the joint venture entity. However, the general concessions available to subsidiaries in paragraphs 24 to 26 will not be available to joint ventures.","sortOrder":12},{"sectionNumber":"Audit Committee","sectionType":"division","heading":"Audit Committee","content":"### Audit Committee\n\n30. A life company must have an Audit Committee.[\\[8\\]](#_ftn8) A life company (including an EFLIC) will need to comply with the requirements with respect to Audit Committees as set out in the Life Insurance Act.[\\[9\\]](#_ftn9) Other Board Committees may have risk management responsibilities provided the Audit Committee retains the functions prescribed by section 92 of the Act.\n\n31. The Audit Committee must have sufficient powers to enable it to obtain all information necessary for the performance of its functions.\n\n32. The Audit Committee must have at least three members. A majority of members of the Committee must be persons who are not executive officers of the life company.[\\[10\\]](#_ftn10) A majority of the members of the Committee must be independent.\n\n33. The chairperson of the Audit Committee must be an independent director of the life company.\n\n34. The chairperson of the Board can sit on the Audit Committee, but cannot chair the Committee.[\\[11\\]](#_ftn11)\n\n35. The Audit Committee must have a charter that includes a reference to the fact that the Committee is responsible for the oversight of APRA statutory reporting requirements as well as other financial reporting requirements, professional accounting requirements, internal and external audit, the appointment of the life company’s external auditor,[\\[12\\]](#_ftn12) and ensuring that the life company has a sound system of management and financial controls.[\\[13\\]](#_ftn13)\n\n36. The Audit Committee should also be responsible for formulating the risk strategy of the life company, for determining policies that ensure the strategy is adhered to, and for monitoring adherence to those policies.\n\n37. The Audit Committee must review the external auditor’s engagement at least annually, including making an assessment of whether the auditor meets the Audit Independence tests set out in Professional Statement F1 Professional Independence,[\\[14\\]](#_ftn14) as well as the additional auditor independence requirements set out in this Prudential Standard. For an EFLIC, it will be the responsibility of the Compliance Committee to undertake this assessment.\n\n38. The Audit Committee must regularly review the internal and external audit plans, ensuring that they cover all material risks and financial reporting requirements of the life company. It must regularly review the findings of audits, and ensure that issues are being managed and rectified in an appropriate and timely manner.\n\n39. The Audit Committee must ensure the adequacy and independence of both the internal and external audit functions.\n\n40. The members of the Audit Committee must, at all times, have free and unfettered access to senior management, the internal auditor, the heads of all risk management functions, the life company’s external auditor, and the Appointed Actuary and vice-versa.\n\n41. The Audit Committee must establish and maintain policies and procedures for employees of the life company to submit, confidentially, information about accounting, internal control, compliance, audit, and other matters about which the employee has concerns. The Committee should also have a process for ensuring employees are aware of these policies and for dealing with matters raised by employees under these policies.\n\n42. Members of the Audit Committee must be available to meet with APRA on request.\n\n43. The Audit Committee must invite the life company’s external auditor and Appointed Actuary to meetings of the Committee where reasonable and necessary to enable the auditor and actuary to perform their functions in accordance with the Life Insurance Act.[\\[15\\]](#_ftn15)\n\n44. The internal auditor must have a reporting line and unfettered access to the Audit Committee. For EFLICs, the auditor of the local operation must have direct access to the Head Office audit function.","sortOrder":13},{"sectionNumber":"Internal audit","sectionType":"division","heading":"Internal audit","content":"### Internal audit\n\n45. A life company (including an EFLIC in relation to its Australian business) must have an independent and adequately resourced internal audit function. If a life company does not believe it is necessary to have a dedicated internal audit function, it must apply to APRA, in writing, seeking an exemption from this requirement, and set out reasons why it should be exempt. APRA may approve alternative arrangements for a life company where APRA is satisfied that they will achieve the same objectives.\n\n46. The objectives of the internal audit function must include evaluation of the adequacy and effectiveness of the financial and risk management framework of the life company (including an EFLIC). To fulfil its functions, the internal auditor must, at all times, have unfettered access to all the life company’s business lines and support functions.","sortOrder":14},{"sectionNumber":"Auditor independence","sectionType":"division","heading":"Auditor independence","content":"### Auditor independence\n\n47. The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 introduced a number of new requirements into the Corporations Act 2001 (Corporations Act) in relation to auditor independence. The auditor independence requirements in this Prudential Standard are substantially consistent with those requirements, and are intended to help ensure the independence of an auditor engaged to perform work of a prudential nature in relation to the Life Insurance Act, the Prudential Standards and the Reporting Standards.[\\[16\\]](#_ftn16)\n\n48. The Board of a life company (and the Compliance Committee in the case of an EFLIC) must, to the extent practical, undertake steps to satisfy itself that the auditor, who undertakes work for the life company (or EFLIC) in relation to the Life Insurance Act, the Prudential Standards, or the Reporting Standards, is independent of the life company (or EFLIC),[\\[17\\]](#_ftn17) and that there is no conflict of interest situation that could compromise, or be seen to compromise, the independence of the auditor.\n\n49. As part of the process of ascertaining the independence of the auditor, a life company (including an EFLIC) must obtain a declaration from the auditor to the effect that the auditor is independent, both in appearance and in fact, and has no conflict of interest situation, and that there is nothing to the auditor’s knowledge (either in relation to the individual auditor or any audit firm or audit company of which the auditor is a member or director) that could compromise that independence.\n\n50. For the purposes of this Prudential Standard, a conflict of interest situation exists in relation to a life company (or EFLIC) at a particular time, if because of circumstances that exist at that time:\n\n(a) the auditor is not capable of exercising objective and impartial judgement in relation to the conduct of the work that is undertaken for the life company (or EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards; or\n\n(b) a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the auditor is not capable of exercising objective and impartial judgement in relation to undertaking the work for the life company (or EFLIC) for the purposes of the Life Insurance Act, the Prudential Standards, or the Reporting Standards.[\\[18\\]](#_ftn18)","sortOrder":15},{"sectionNumber":"51. A person, who was a member of an aud","sectionType":"section","heading":"51. A person, who was a member of an audit firm or a director of an audit company, and who served in a professional capacity in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they served in that capacity.","content":"##### 51. A person, who was a member of an audit firm or a director of an audit company, and who served in a professional capacity in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they served in that capacity.\n\n52. A person, who was an employee of an audit company, other than a director of that company, and who acted as the lead auditor[\\[19\\]](#_ftn19) or review auditor[\\[20\\]](#_ftn20) in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they acted as the lead auditor or review auditor.","sortOrder":16},{"sectionNumber":"53. A person cannot be appointed as a di","sectionType":"section","heading":"53. A person cannot be appointed as a director or senior manager of a life company (or a senior manager in the case of an EFLIC) if:","content":"### Authority\n\n1.  This Prudential Standard, made under s230A of the Life Insurance Act 1995 (Life Insurance Act), applies to all life companies authorised under the Life Insurance Act.\n\n### Application\n\n2. All life companies (except eligible foreign life insurance companies[\\[1\\]](#_ftn1)) have to comply with this Prudential Standard in its entirety.\n\n3. Eligible foreign life insurance companies (EFLICs) have to comply with only those provisions of this Prudential Standard which specifically indicate that they apply to EFLICs. The obligations imposed by this Prudential Standard, on or in relation to an EFLIC, only apply in relation to its Australian business. Attachment B to this Prudential Standard applies specifically to EFLICs.\n\n### The Board and senior management\n\n4. The Board of directors (the Board) of a life company is ultimately responsible for the sound and prudent management of the life company. This Prudential Standard sets out the minimum requirements that a life company must meet in the interests of promoting strong and effective governance.\n\n5. The Board of a life company must have a formal charter that sets out the roles and responsibilities of the Board.\n\n6. The Board, in fulfilling its functions, may delegate authority to management to act on behalf of the Board with respect to certain matters, as decided by the Board. This delegation of authority must be clearly set out and documented. The Board must have mechanisms in place for monitoring the exercise of delegated authority. The Board cannot abrogate its responsibility for functions delegated to management.\n\n7. The Board must ensure that directors and senior management of the life company, collectively, have the full range of skills needed for the effective and prudent operation of the life company, and that each director has skills that allow them to make an effective contribution to Board deliberations and processes. This includes the requirement for directors, collectively, to have the necessary skills, knowledge and experience to understand the risks of the life company, including its legal and prudential obligations, and to ensure that the life company is managed in an appropriate way taking into account these risks. This does not preclude the Board from supplementing its skills and knowledge through the use of external consultants and experts.\n\n8. Senior management of the life company (and senior management of an EFLIC), with responsibilities relating to the business in Australia, must be ordinarily resident in Australia.\n\n9. Members of the Board and senior management (and senior management of the EFLIC) must be available to meet with APRA on request.\n\n10. The Board must provide the external auditor[\\[2\\]](#_ftn2) and the Appointed Actuary of the life company with the opportunity to raise matters directly with the Board (the Compliance Committee for an EFLIC[\\[3\\]](#_ftn3)).\n\n### Independence\n\n11. For the purposes of this Prudential Standard, an independent director is a non-executive director who is free from any business or other association – including those arising out of a substantial shareholding, involvement in past management or as a supplier, customer or adviser – that could materially interfere with the exercise of their independent judgement. In assessing whether a director is independent, the Board must apply the definition set out in the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (Attachment A).\n\n12. If the Board of a life company is in doubt regarding a director’s independence, the life company may refer the matter to APRA for guidance.\n\n### Definition of non-executive director\n\n13. For the purposes of this Prudential Standard a reference to “non-executive” director is to be interpreted as meaning a director who is not a member of management.\n\n### Board composition\n\n14. The Board of a life company must have a minimum of five directors at all times.\n\n15. The Board must have a majority of independent directors at all times. For life companies that are subsidiaries[\\[4\\]](#_ftn4) of other APRA-regulated institutions or overseas equivalents,[\\[5\\]](#_ftn5) exceptions may apply as set out at paragraphs 24 to 26. For life companies that are subsidiaries of a parent company that is not prudentially regulated exceptions may apply as set out at paragraph 27.\n\n16. The chairperson of the Board must be an independent director of the life company.\n\n17. A majority of directors present and eligible to vote at all Board meetings must be non-executives.\n\n18. The chairperson of the Board cannot have been the Chief Executive Officer (CEO) of the life company at any time during the previous three years. If the position of the CEO is unexpectedly vacated, the chairperson may serve as an interim CEO. After a period of 90 days, approval must be sought from APRA to allow this arrangement to continue.\n\n19. The chairperson must be available to meet with APRA on request.\n\n20. For locally\\-owned and incorporated life companies, a majority of directors must be ordinarily resident in Australia.\n\n21. For foreign-owned locally incorporated life companies at least two of the directors of the life company must be ordinarily resident in Australia, at least one of whom must also be independent.\n\n22. Board representation must be consistent with a life company’s shareholding. Where a shareholding constitutes not more than 15% of a life company’s voting shares there should not be more than one Board member who is an associate of the shareholder where the Board has up to six directors, and not more than two Board members who are associates of the shareholder where the Board has seven or more directors. A director is taken to be an associate of a shareholder for the purposes of this clause, if the director is an “associate” of the shareholder, or the shareholder is an “associate” of the director, according to the definition of “associate” in clause 4 of Schedule 1 of the Financial Sector (Shareholdings) Act 1998. That definition is to be applied for the purposes of this clause as if subparagraph (1)(l) of that definition were omitted.\n\n23. Where an individual shareholding is greater than 15%, as approved under the Financial Sector (Shareholdings) Act 1998, the Board representation of that shareholding can be greater than allowed in paragraph 22, although it must still be broadly proportionate to the shareholding concerned.[\\[6\\]](#_ftn6)\n\n### Life companies that are subsidiaries of other APRA-regulated institutions or overseas equivalents\n\n24. For a life company that is a subsidiary of another APRA-regulated institution or an overseas equivalent, the Board of the life company must have a majority of non-executive directors, but these non-executive directors need not all be independent. They can include Board members or senior management of the parent company or its subsidiaries, but not executives of the life company or its subsidiaries.\n\n25. A life company to which paragraph 24 applies will be required to have, at a minimum, two independent directors, in addition to an independent chairperson, where the Board has up to seven members. Where the Board has more than seven members, the life company will be required to have at least three independent directors, in addition to an independent chairperson.\n\n26. For the purposes of meeting the requirements in paragraph 25, the independent directors on the Board of the parent company or its other subsidiaries can also sit as independent directors on the Board of the life company.\n\n### Subsidiaries with a parent that is not prudentially regulated\n\n27. For a life company that is a subsidiary of another entity, not covered by the arrangements in paragraphs 24 to 26 of this Prudential Standard, the Board must have a majority of independent directors. However, independent directors on the Board of the parent company or its other subsidiaries can also sit as independent directors on the Board of the life company.\n\n### Life companies that are part of a corporate group\n\n28. Where a life company is part of a corporate group[\\[7\\]](#_ftn7) (group), and the life company utilises group policies or functions, the Board of the life company must ensure that these policies and functions give appropriate regard to the life company’s business and its specific requirements.\n\n### Joint ventures\n\n29. For the purposes of this Prudential Standard, a life company that operates as a joint venture can be considered as part of the group of each parent entity. Independent directors of a parent can sit as independent directors on the Board of the joint venture entity. However, the general concessions available to subsidiaries in paragraphs 24 to 26 will not be available to joint ventures.\n\n### Audit Committee\n\n30. A life company must have an Audit Committee.[\\[8\\]](#_ftn8) A life company (including an EFLIC) will need to comply with the requirements with respect to Audit Committees as set out in the Life Insurance Act.[\\[9\\]](#_ftn9) Other Board Committees may have risk management responsibilities provided the Audit Committee retains the functions prescribed by section 92 of the Act.\n\n31. The Audit Committee must have sufficient powers to enable it to obtain all information necessary for the performance of its functions.\n\n32. The Audit Committee must have at least three members. A majority of members of the Committee must be persons who are not executive officers of the life company.[\\[10\\]](#_ftn10) A majority of the members of the Committee must be independent.\n\n33. The chairperson of the Audit Committee must be an independent director of the life company.\n\n34. The chairperson of the Board can sit on the Audit Committee, but cannot chair the Committee.[\\[11\\]](#_ftn11)\n\n35. The Audit Committee must have a charter that includes a reference to the fact that the Committee is responsible for the oversight of APRA statutory reporting requirements as well as other financial reporting requirements, professional accounting requirements, internal and external audit, the appointment of the life company’s external auditor,[\\[12\\]](#_ftn12) and ensuring that the life company has a sound system of management and financial controls.[\\[13\\]](#_ftn13)\n\n36. The Audit Committee should also be responsible for formulating the risk strategy of the life company, for determining policies that ensure the strategy is adhered to, and for monitoring adherence to those policies.\n\n37. The Audit Committee must review the external auditor’s engagement at least annually, including making an assessment of whether the auditor meets the Audit Independence tests set out in Professional Statement F1 Professional Independence,[\\[14\\]](#_ftn14) as well as the additional auditor independence requirements set out in this Prudential Standard. For an EFLIC, it will be the responsibility of the Compliance Committee to undertake this assessment.\n\n38. The Audit Committee must regularly review the internal and external audit plans, ensuring that they cover all material risks and financial reporting requirements of the life company. It must regularly review the findings of audits, and ensure that issues are being managed and rectified in an appropriate and timely manner.\n\n39. The Audit Committee must ensure the adequacy and independence of both the internal and external audit functions.\n\n40. The members of the Audit Committee must, at all times, have free and unfettered access to senior management, the internal auditor, the heads of all risk management functions, the life company’s external auditor, and the Appointed Actuary and vice-versa.\n\n41. The Audit Committee must establish and maintain policies and procedures for employees of the life company to submit, confidentially, information about accounting, internal control, compliance, audit, and other matters about which the employee has concerns. The Committee should also have a process for ensuring employees are aware of these policies and for dealing with matters raised by employees under these policies.\n\n42. Members of the Audit Committee must be available to meet with APRA on request.\n\n43. The Audit Committee must invite the life company’s external auditor and Appointed Actuary to meetings of the Committee where reasonable and necessary to enable the auditor and actuary to perform their functions in accordance with the Life Insurance Act.[\\[15\\]](#_ftn15)\n\n44. The internal auditor must have a reporting line and unfettered access to the Audit Committee. For EFLICs, the auditor of the local operation must have direct access to the Head Office audit function.\n\n### Internal audit\n\n45. A life company (including an EFLIC in relation to its Australian business) must have an independent and adequately resourced internal audit function. If a life company does not believe it is necessary to have a dedicated internal audit function, it must apply to APRA, in writing, seeking an exemption from this requirement, and set out reasons why it should be exempt. APRA may approve alternative arrangements for a life company where APRA is satisfied that they will achieve the same objectives.\n\n46. The objectives of the internal audit function must include evaluation of the adequacy and effectiveness of the financial and risk management framework of the life company (including an EFLIC). To fulfil its functions, the internal auditor must, at all times, have unfettered access to all the life company’s business lines and support functions.\n\n### Auditor independence\n\n47. The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 introduced a number of new requirements into the Corporations Act 2001 (Corporations Act) in relation to auditor independence. The auditor independence requirements in this Prudential Standard are substantially consistent with those requirements, and are intended to help ensure the independence of an auditor engaged to perform work of a prudential nature in relation to the Life Insurance Act, the Prudential Standards and the Reporting Standards.[\\[16\\]](#_ftn16)\n\n48. The Board of a life company (and the Compliance Committee in the case of an EFLIC) must, to the extent practical, undertake steps to satisfy itself that the auditor, who undertakes work for the life company (or EFLIC) in relation to the Life Insurance Act, the Prudential Standards, or the Reporting Standards, is independent of the life company (or EFLIC),[\\[17\\]](#_ftn17) and that there is no conflict of interest situation that could compromise, or be seen to compromise, the independence of the auditor.\n\n49. As part of the process of ascertaining the independence of the auditor, a life company (including an EFLIC) must obtain a declaration from the auditor to the effect that the auditor is independent, both in appearance and in fact, and has no conflict of interest situation, and that there is nothing to the auditor’s knowledge (either in relation to the individual auditor or any audit firm or audit company of which the auditor is a member or director) that could compromise that independence.\n\n50. For the purposes of this Prudential Standard, a conflict of interest situation exists in relation to a life company (or EFLIC) at a particular time, if because of circumstances that exist at that time:\n\n(a) the auditor is not capable of exercising objective and impartial judgement in relation to the conduct of the work that is undertaken for the life company (or EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards; or\n\n(b) a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the auditor is not capable of exercising objective and impartial judgement in relation to undertaking the work for the life company (or EFLIC) for the purposes of the Life Insurance Act, the Prudential Standards, or the Reporting Standards.[\\[18\\]](#_ftn18)\n\n##### 51. A person, who was a member of an audit firm or a director of an audit company, and who served in a professional capacity in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they served in that capacity.\n\n52. A person, who was an employee of an audit company, other than a director of that company, and who acted as the lead auditor[\\[19\\]](#_ftn19) or review auditor[\\[20\\]](#_ftn20) in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they acted as the lead auditor or review auditor.\n\n##### 53. A person cannot be appointed as a director or senior manager of a life company (or a senior manager in the case of an EFLIC) if:\n\n##### (a) the person was, or is, a director of the audit company or a member of the audit firm that was, or is, responsible for the audit of the life company in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards; and\n\n##### (b) there is already another person employed as a director or senior manager of the life company who was a director of the audit company or a member of the audit firm, at a time when the audit company or audit firm undertook an audit of the life company at any time during the previous two years.\n\n54. An individual who plays a significant role[\\[21\\]](#_ftn21) in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, for five successive years, or for more than five years out of seven successive years, cannot continue to play a significant role in the audit until at least a further two years have passed, except with an exemption from APRA. APRA may grant an exemption from this requirement if the individual provides specialist services that are otherwise not readily available or there are no other registered company auditors available to provide satisfactory services for the life company.\n\n55. For the purposes of maintaining their independence and objectivity, the Approved Auditor[\\[22\\]](#_ftn22) and Appointed Actuary[\\[23\\]](#_ftn23) of a life company (including an EFLIC), cannot both be employed by the same body corporate or related bodies corporate, or by the same firm or related firms.[\\[24\\]](#_ftn24)\n\n### Board performance assessment\n\n56. The Board of a life company must have procedures for assessing, at least annually, the Board’s performance relative to its objectives. It must also have in place a procedure for assessing, at least annually, the performance of individual directors.\n\n### Board renewal\n\n57. The Board of a life company must have in place a formal policy on Board renewal. This policy must provide details of how the Board intends to renew itself in order to ensure it remains open to new ideas and independent thinking, while retaining adequate expertise.\n\n### Persons not to be constrained from providing information to APRA\n\n58. No prospective, current, or former officer,[\\[25\\]](#_ftn25) employee or contractor (including professional service provider) of a life company (including an EFLIC), may be constrained or impeded, whether by confidentiality clauses or other means, from disclosing information to APRA, from discussing issues with APRA of relevance to the management and prudential supervision of the life company, or from providing documents under their control to APRA, that may be relevant in the context of the management or prudential supervision of the life company. Such persons are not to be constrained or impeded from providing information to auditors, the Appointed Actuary and others, who have statutory responsibilities in relation to the life company.\n\n59. Life companies (including EFLICs) must ensure that their internal policy and contractual arrangements do not explicitly or implicitly restrict or discourage auditors or other parties from communicating with APRA.\n\n### Commencement and transitional arrangements\n\n60. This Prudential Standard commences on 1 October 2006.\n\n61. Upon commencement of this Prudential Standard, existing requirements applying to Friendly Societies under Prudential Standard PS 6.3C Audit will be varied to remove matters from that Prudential Standard that are covered by this Prudential Standard.\n\n62. A life company may be unable to comply immediately with particular requirements in this Prudential Standard upon commencement, due to the need to seek the approval of members to give effect to changes required by this Prudential Standard. If the life company has notified APRA of this matter, in writing, prior to the commencement of this Prudential Standard, providing details of the next scheduled meeting of members that will allow the necessary approval to be sought, those particular requirements do not apply to that life company on commencement of this Prudential Standard. In any event, those requirements will apply to the life company not later than 31 March 2007.\n\n63. Upon commencement of this Prudential Standard, the auditor rotation and independence requirements required by paragraph 54 will apply. However the auditor of a life company (including an EFLIC) not previously subject to the auditor rotation provisions in the Corporations Act can continue in this role even if they have already been the auditor for five successive years, or more than five out of seven successive years upon commencement of this Prudential Standard for a further period of not more than two years from the date of commencement of this Prudential Standard.","sortOrder":17},{"sectionNumber":"(a) the person was, or is, a director of","sectionType":"section","heading":"(a) the person was, or is, a director of the audit company or a member of the audit firm that was, or is, responsible for the audit of the life company in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards; and","content":"### Authority\n\n1.  This Prudential Standard, made under s230A of the Life Insurance Act 1995 (Life Insurance Act), applies to all life companies authorised under the Life Insurance Act.\n\n### Application\n\n2. All life companies (except eligible foreign life insurance companies[\\[1\\]](#_ftn1)) have to comply with this Prudential Standard in its entirety.\n\n3. Eligible foreign life insurance companies (EFLICs) have to comply with only those provisions of this Prudential Standard which specifically indicate that they apply to EFLICs. The obligations imposed by this Prudential Standard, on or in relation to an EFLIC, only apply in relation to its Australian business. Attachment B to this Prudential Standard applies specifically to EFLICs.\n\n### The Board and senior management\n\n4. The Board of directors (the Board) of a life company is ultimately responsible for the sound and prudent management of the life company. This Prudential Standard sets out the minimum requirements that a life company must meet in the interests of promoting strong and effective governance.\n\n5. The Board of a life company must have a formal charter that sets out the roles and responsibilities of the Board.\n\n6. The Board, in fulfilling its functions, may delegate authority to management to act on behalf of the Board with respect to certain matters, as decided by the Board. This delegation of authority must be clearly set out and documented. The Board must have mechanisms in place for monitoring the exercise of delegated authority. The Board cannot abrogate its responsibility for functions delegated to management.\n\n7. The Board must ensure that directors and senior management of the life company, collectively, have the full range of skills needed for the effective and prudent operation of the life company, and that each director has skills that allow them to make an effective contribution to Board deliberations and processes. This includes the requirement for directors, collectively, to have the necessary skills, knowledge and experience to understand the risks of the life company, including its legal and prudential obligations, and to ensure that the life company is managed in an appropriate way taking into account these risks. This does not preclude the Board from supplementing its skills and knowledge through the use of external consultants and experts.\n\n8. Senior management of the life company (and senior management of an EFLIC), with responsibilities relating to the business in Australia, must be ordinarily resident in Australia.\n\n9. Members of the Board and senior management (and senior management of the EFLIC) must be available to meet with APRA on request.\n\n10. The Board must provide the external auditor[\\[2\\]](#_ftn2) and the Appointed Actuary of the life company with the opportunity to raise matters directly with the Board (the Compliance Committee for an EFLIC[\\[3\\]](#_ftn3)).\n\n### Independence\n\n11. For the purposes of this Prudential Standard, an independent director is a non-executive director who is free from any business or other association – including those arising out of a substantial shareholding, involvement in past management or as a supplier, customer or adviser – that could materially interfere with the exercise of their independent judgement. In assessing whether a director is independent, the Board must apply the definition set out in the ASX Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (Attachment A).\n\n12. If the Board of a life company is in doubt regarding a director’s independence, the life company may refer the matter to APRA for guidance.\n\n### Definition of non-executive director\n\n13. For the purposes of this Prudential Standard a reference to “non-executive” director is to be interpreted as meaning a director who is not a member of management.\n\n### Board composition\n\n14. The Board of a life company must have a minimum of five directors at all times.\n\n15. The Board must have a majority of independent directors at all times. For life companies that are subsidiaries[\\[4\\]](#_ftn4) of other APRA-regulated institutions or overseas equivalents,[\\[5\\]](#_ftn5) exceptions may apply as set out at paragraphs 24 to 26. For life companies that are subsidiaries of a parent company that is not prudentially regulated exceptions may apply as set out at paragraph 27.\n\n16. The chairperson of the Board must be an independent director of the life company.\n\n17. A majority of directors present and eligible to vote at all Board meetings must be non-executives.\n\n18. The chairperson of the Board cannot have been the Chief Executive Officer (CEO) of the life company at any time during the previous three years. If the position of the CEO is unexpectedly vacated, the chairperson may serve as an interim CEO. After a period of 90 days, approval must be sought from APRA to allow this arrangement to continue.\n\n19. The chairperson must be available to meet with APRA on request.\n\n20. For locally\\-owned and incorporated life companies, a majority of directors must be ordinarily resident in Australia.\n\n21. For foreign-owned locally incorporated life companies at least two of the directors of the life company must be ordinarily resident in Australia, at least one of whom must also be independent.\n\n22. Board representation must be consistent with a life company’s shareholding. Where a shareholding constitutes not more than 15% of a life company’s voting shares there should not be more than one Board member who is an associate of the shareholder where the Board has up to six directors, and not more than two Board members who are associates of the shareholder where the Board has seven or more directors. A director is taken to be an associate of a shareholder for the purposes of this clause, if the director is an “associate” of the shareholder, or the shareholder is an “associate” of the director, according to the definition of “associate” in clause 4 of Schedule 1 of the Financial Sector (Shareholdings) Act 1998. That definition is to be applied for the purposes of this clause as if subparagraph (1)(l) of that definition were omitted.\n\n23. Where an individual shareholding is greater than 15%, as approved under the Financial Sector (Shareholdings) Act 1998, the Board representation of that shareholding can be greater than allowed in paragraph 22, although it must still be broadly proportionate to the shareholding concerned.[\\[6\\]](#_ftn6)\n\n### Life companies that are subsidiaries of other APRA-regulated institutions or overseas equivalents\n\n24. For a life company that is a subsidiary of another APRA-regulated institution or an overseas equivalent, the Board of the life company must have a majority of non-executive directors, but these non-executive directors need not all be independent. They can include Board members or senior management of the parent company or its subsidiaries, but not executives of the life company or its subsidiaries.\n\n25. A life company to which paragraph 24 applies will be required to have, at a minimum, two independent directors, in addition to an independent chairperson, where the Board has up to seven members. Where the Board has more than seven members, the life company will be required to have at least three independent directors, in addition to an independent chairperson.\n\n26. For the purposes of meeting the requirements in paragraph 25, the independent directors on the Board of the parent company or its other subsidiaries can also sit as independent directors on the Board of the life company.\n\n### Subsidiaries with a parent that is not prudentially regulated\n\n27. For a life company that is a subsidiary of another entity, not covered by the arrangements in paragraphs 24 to 26 of this Prudential Standard, the Board must have a majority of independent directors. However, independent directors on the Board of the parent company or its other subsidiaries can also sit as independent directors on the Board of the life company.\n\n### Life companies that are part of a corporate group\n\n28. Where a life company is part of a corporate group[\\[7\\]](#_ftn7) (group), and the life company utilises group policies or functions, the Board of the life company must ensure that these policies and functions give appropriate regard to the life company’s business and its specific requirements.\n\n### Joint ventures\n\n29. For the purposes of this Prudential Standard, a life company that operates as a joint venture can be considered as part of the group of each parent entity. Independent directors of a parent can sit as independent directors on the Board of the joint venture entity. However, the general concessions available to subsidiaries in paragraphs 24 to 26 will not be available to joint ventures.\n\n### Audit Committee\n\n30. A life company must have an Audit Committee.[\\[8\\]](#_ftn8) A life company (including an EFLIC) will need to comply with the requirements with respect to Audit Committees as set out in the Life Insurance Act.[\\[9\\]](#_ftn9) Other Board Committees may have risk management responsibilities provided the Audit Committee retains the functions prescribed by section 92 of the Act.\n\n31. The Audit Committee must have sufficient powers to enable it to obtain all information necessary for the performance of its functions.\n\n32. The Audit Committee must have at least three members. A majority of members of the Committee must be persons who are not executive officers of the life company.[\\[10\\]](#_ftn10) A majority of the members of the Committee must be independent.\n\n33. The chairperson of the Audit Committee must be an independent director of the life company.\n\n34. The chairperson of the Board can sit on the Audit Committee, but cannot chair the Committee.[\\[11\\]](#_ftn11)\n\n35. The Audit Committee must have a charter that includes a reference to the fact that the Committee is responsible for the oversight of APRA statutory reporting requirements as well as other financial reporting requirements, professional accounting requirements, internal and external audit, the appointment of the life company’s external auditor,[\\[12\\]](#_ftn12) and ensuring that the life company has a sound system of management and financial controls.[\\[13\\]](#_ftn13)\n\n36. The Audit Committee should also be responsible for formulating the risk strategy of the life company, for determining policies that ensure the strategy is adhered to, and for monitoring adherence to those policies.\n\n37. The Audit Committee must review the external auditor’s engagement at least annually, including making an assessment of whether the auditor meets the Audit Independence tests set out in Professional Statement F1 Professional Independence,[\\[14\\]](#_ftn14) as well as the additional auditor independence requirements set out in this Prudential Standard. For an EFLIC, it will be the responsibility of the Compliance Committee to undertake this assessment.\n\n38. The Audit Committee must regularly review the internal and external audit plans, ensuring that they cover all material risks and financial reporting requirements of the life company. It must regularly review the findings of audits, and ensure that issues are being managed and rectified in an appropriate and timely manner.\n\n39. The Audit Committee must ensure the adequacy and independence of both the internal and external audit functions.\n\n40. The members of the Audit Committee must, at all times, have free and unfettered access to senior management, the internal auditor, the heads of all risk management functions, the life company’s external auditor, and the Appointed Actuary and vice-versa.\n\n41. The Audit Committee must establish and maintain policies and procedures for employees of the life company to submit, confidentially, information about accounting, internal control, compliance, audit, and other matters about which the employee has concerns. The Committee should also have a process for ensuring employees are aware of these policies and for dealing with matters raised by employees under these policies.\n\n42. Members of the Audit Committee must be available to meet with APRA on request.\n\n43. The Audit Committee must invite the life company’s external auditor and Appointed Actuary to meetings of the Committee where reasonable and necessary to enable the auditor and actuary to perform their functions in accordance with the Life Insurance Act.[\\[15\\]](#_ftn15)\n\n44. The internal auditor must have a reporting line and unfettered access to the Audit Committee. For EFLICs, the auditor of the local operation must have direct access to the Head Office audit function.\n\n### Internal audit\n\n45. A life company (including an EFLIC in relation to its Australian business) must have an independent and adequately resourced internal audit function. If a life company does not believe it is necessary to have a dedicated internal audit function, it must apply to APRA, in writing, seeking an exemption from this requirement, and set out reasons why it should be exempt. APRA may approve alternative arrangements for a life company where APRA is satisfied that they will achieve the same objectives.\n\n46. The objectives of the internal audit function must include evaluation of the adequacy and effectiveness of the financial and risk management framework of the life company (including an EFLIC). To fulfil its functions, the internal auditor must, at all times, have unfettered access to all the life company’s business lines and support functions.\n\n### Auditor independence\n\n47. The Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 introduced a number of new requirements into the Corporations Act 2001 (Corporations Act) in relation to auditor independence. The auditor independence requirements in this Prudential Standard are substantially consistent with those requirements, and are intended to help ensure the independence of an auditor engaged to perform work of a prudential nature in relation to the Life Insurance Act, the Prudential Standards and the Reporting Standards.[\\[16\\]](#_ftn16)\n\n48. The Board of a life company (and the Compliance Committee in the case of an EFLIC) must, to the extent practical, undertake steps to satisfy itself that the auditor, who undertakes work for the life company (or EFLIC) in relation to the Life Insurance Act, the Prudential Standards, or the Reporting Standards, is independent of the life company (or EFLIC),[\\[17\\]](#_ftn17) and that there is no conflict of interest situation that could compromise, or be seen to compromise, the independence of the auditor.\n\n49. As part of the process of ascertaining the independence of the auditor, a life company (including an EFLIC) must obtain a declaration from the auditor to the effect that the auditor is independent, both in appearance and in fact, and has no conflict of interest situation, and that there is nothing to the auditor’s knowledge (either in relation to the individual auditor or any audit firm or audit company of which the auditor is a member or director) that could compromise that independence.\n\n50. For the purposes of this Prudential Standard, a conflict of interest situation exists in relation to a life company (or EFLIC) at a particular time, if because of circumstances that exist at that time:\n\n(a) the auditor is not capable of exercising objective and impartial judgement in relation to the conduct of the work that is undertaken for the life company (or EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards; or\n\n(b) a reasonable person, with full knowledge of all relevant facts and circumstances, would conclude that the auditor is not capable of exercising objective and impartial judgement in relation to undertaking the work for the life company (or EFLIC) for the purposes of the Life Insurance Act, the Prudential Standards, or the Reporting Standards.[\\[18\\]](#_ftn18)\n\n##### 51. A person, who was a member of an audit firm or a director of an audit company, and who served in a professional capacity in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they served in that capacity.\n\n52. A person, who was an employee of an audit company, other than a director of that company, and who acted as the lead auditor[\\[19\\]](#_ftn19) or review auditor[\\[20\\]](#_ftn20) in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, cannot be appointed to the role of director or senior manager of that life company until at least two years have passed since they acted as the lead auditor or review auditor.\n\n##### 53. A person cannot be appointed as a director or senior manager of a life company (or a senior manager in the case of an EFLIC) if:\n\n##### (a) the person was, or is, a director of the audit company or a member of the audit firm that was, or is, responsible for the audit of the life company in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards; and\n\n##### (b) there is already another person employed as a director or senior manager of the life company who was a director of the audit company or a member of the audit firm, at a time when the audit company or audit firm undertook an audit of the life company at any time during the previous two years.\n\n54. An individual who plays a significant role[\\[21\\]](#_ftn21) in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, for five successive years, or for more than five years out of seven successive years, cannot continue to play a significant role in the audit until at least a further two years have passed, except with an exemption from APRA. APRA may grant an exemption from this requirement if the individual provides specialist services that are otherwise not readily available or there are no other registered company auditors available to provide satisfactory services for the life company.\n\n55. For the purposes of maintaining their independence and objectivity, the Approved Auditor[\\[22\\]](#_ftn22) and Appointed Actuary[\\[23\\]](#_ftn23) of a life company (including an EFLIC), cannot both be employed by the same body corporate or related bodies corporate, or by the same firm or related firms.[\\[24\\]](#_ftn24)\n\n### Board performance assessment\n\n56. The Board of a life company must have procedures for assessing, at least annually, the Board’s performance relative to its objectives. It must also have in place a procedure for assessing, at least annually, the performance of individual directors.\n\n### Board renewal\n\n57. The Board of a life company must have in place a formal policy on Board renewal. This policy must provide details of how the Board intends to renew itself in order to ensure it remains open to new ideas and independent thinking, while retaining adequate expertise.\n\n### Persons not to be constrained from providing information to APRA\n\n58. No prospective, current, or former officer,[\\[25\\]](#_ftn25) employee or contractor (including professional service provider) of a life company (including an EFLIC), may be constrained or impeded, whether by confidentiality clauses or other means, from disclosing information to APRA, from discussing issues with APRA of relevance to the management and prudential supervision of the life company, or from providing documents under their control to APRA, that may be relevant in the context of the management or prudential supervision of the life company. Such persons are not to be constrained or impeded from providing information to auditors, the Appointed Actuary and others, who have statutory responsibilities in relation to the life company.\n\n59. Life companies (including EFLICs) must ensure that their internal policy and contractual arrangements do not explicitly or implicitly restrict or discourage auditors or other parties from communicating with APRA.\n\n### Commencement and transitional arrangements\n\n60. This Prudential Standard commences on 1 October 2006.\n\n61. Upon commencement of this Prudential Standard, existing requirements applying to Friendly Societies under Prudential Standard PS 6.3C Audit will be varied to remove matters from that Prudential Standard that are covered by this Prudential Standard.\n\n62. A life company may be unable to comply immediately with particular requirements in this Prudential Standard upon commencement, due to the need to seek the approval of members to give effect to changes required by this Prudential Standard. If the life company has notified APRA of this matter, in writing, prior to the commencement of this Prudential Standard, providing details of the next scheduled meeting of members that will allow the necessary approval to be sought, those particular requirements do not apply to that life company on commencement of this Prudential Standard. In any event, those requirements will apply to the life company not later than 31 March 2007.\n\n63. Upon commencement of this Prudential Standard, the auditor rotation and independence requirements required by paragraph 54 will apply. However the auditor of a life company (including an EFLIC) not previously subject to the auditor rotation provisions in the Corporations Act can continue in this role even if they have already been the auditor for five successive years, or more than five out of seven successive years upon commencement of this Prudential Standard for a further period of not more than two years from the date of commencement of this Prudential Standard.","sortOrder":18},{"sectionNumber":"(b) there is already another person empl","sectionType":"section","heading":"(b) there is already another person employed as a director or senior manager of the life company who was a director of the audit company or a member of the audit firm, at a time when the audit company or audit firm undertook an audit of the life company at any time during the previous two years.","content":"##### (b) there is already another person employed as a director or senior manager of the life company who was a director of the audit company or a member of the audit firm, at a time when the audit company or audit firm undertook an audit of the life company at any time during the previous two years.\n\n54. An individual who plays a significant role[\\[21\\]](#_ftn21) in the audit of a life company (including an EFLIC) in relation to the Life Insurance Act, the Prudential Standards or the Reporting Standards, for five successive years, or for more than five years out of seven successive years, cannot continue to play a significant role in the audit until at least a further two years have passed, except with an exemption from APRA. APRA may grant an exemption from this requirement if the individual provides specialist services that are otherwise not readily available or there are no other registered company auditors available to provide satisfactory services for the life company.\n\n55. For the purposes of maintaining their independence and objectivity, the Approved Auditor[\\[22\\]](#_ftn22) and Appointed Actuary[\\[23\\]](#_ftn23) of a life company (including an EFLIC), cannot both be employed by the same body corporate or related bodies corporate, or by the same firm or related firms.[\\[24\\]](#_ftn24)","sortOrder":19},{"sectionNumber":"Board performance assessment","sectionType":"division","heading":"Board performance assessment","content":"### Board performance assessment\n\n56. The Board of a life company must have procedures for assessing, at least annually, the Board’s performance relative to its objectives. It must also have in place a procedure for assessing, at least annually, the performance of individual directors.","sortOrder":20},{"sectionNumber":"Board renewal","sectionType":"division","heading":"Board renewal","content":"### Board renewal\n\n57. The Board of a life company must have in place a formal policy on Board renewal. This policy must provide details of how the Board intends to renew itself in order to ensure it remains open to new ideas and independent thinking, while retaining adequate expertise.","sortOrder":21},{"sectionNumber":"Persons not to be constrained from provi","sectionType":"division","heading":"Persons not to be constrained from providing information to APRA","content":"### Persons not to be constrained from providing information to APRA\n\n58. No prospective, current, or former officer,[\\[25\\]](#_ftn25) employee or contractor (including professional service provider) of a life company (including an EFLIC), may be constrained or impeded, whether by confidentiality clauses or other means, from disclosing information to APRA, from discussing issues with APRA of relevance to the management and prudential supervision of the life company, or from providing documents under their control to APRA, that may be relevant in the context of the management or prudential supervision of the life company. Such persons are not to be constrained or impeded from providing information to auditors, the Appointed Actuary and others, who have statutory responsibilities in relation to the life company.\n\n59. Life companies (including EFLICs) must ensure that their internal policy and contractual arrangements do not explicitly or implicitly restrict or discourage auditors or other parties from communicating with APRA.","sortOrder":22},{"sectionNumber":"Commencement and transitional arrangemen","sectionType":"division","heading":"Commencement and transitional arrangements","content":"### Commencement and transitional arrangements\n\n60. This Prudential Standard commences on 1 October 2006.\n\n61. Upon commencement of this Prudential Standard, existing requirements applying to Friendly Societies under Prudential Standard PS 6.3C Audit will be varied to remove matters from that Prudential Standard that are covered by this Prudential Standard.\n\n62. A life company may be unable to comply immediately with particular requirements in this Prudential Standard upon commencement, due to the need to seek the approval of members to give effect to changes required by this Prudential Standard. If the life company has notified APRA of this matter, in writing, prior to the commencement of this Prudential Standard, providing details of the next scheduled meeting of members that will allow the necessary approval to be sought, those particular requirements do not apply to that life company on commencement of this Prudential Standard. In any event, those requirements will apply to the life company not later than 31 March 2007.\n\n63. Upon commencement of this Prudential Standard, the auditor rotation and independence requirements required by paragraph 54 will apply. However the auditor of a life company (including an EFLIC) not previously subject to the auditor rotation provisions in the Corporations Act can continue in this role even if they have already been the auditor for five successive years, or more than five out of seven successive years upon commencement of this Prudential Standard for a further period of not more than two years from the date of commencement of this Prudential Standard.","sortOrder":23},{"sectionNumber":"An independent director is a non-executi","sectionType":"division","heading":"An independent director is a non-executive director (i.e. is not a member of management) and:","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":24},{"sectionNumber":"1. is not a substantial shareholder[27] ","sectionType":"division","heading":"1. is not a substantial shareholder[27] of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":25},{"sectionNumber":"2. within the last three years has not b","sectionType":"division","heading":"2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":26},{"sectionNumber":"3. within the last three years has not b","sectionType":"division","heading":"3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":27},{"sectionNumber":"4. is not a material supplier or custome","sectionType":"division","heading":"4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":28},{"sectionNumber":"5. has no material contractual relations","sectionType":"division","heading":"5. has no material contractual relationship with the company or another group member other than as a director of the company","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":29},{"sectionNumber":"6. has not served on the board for a per","sectionType":"division","heading":"6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":30},{"sectionNumber":"7. is free from any interest and any bus","sectionType":"division","heading":"7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","content":"Attachment A\n\nDefinition for the purpose of assessing independence[\\[26\\]](#_ftn26)\n\n### An independent director is a non-executive director (i.e. is not a member of management) and:\n\n### 1. is not a substantial shareholder[\\[27\\]](#_ftn27) of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company\n\n### 2. within the last three years has not been employed in an executive capacity by the company or another group member, or been a director after ceasing to hold any such employment\n\n### 3. within the last three years has not been a principal of a material professional adviser or a material consultant to the company or another group member, or an employee materially associated with the service provided\n\n### 4. is not a material supplier or customer of the company or other group member, or an officer of or otherwise associated directly or indirectly with a material supplier or customer\n\n### 5. has no material contractual relationship with the company or another group member other than as a director of the company\n\n### 6. has not served on the board for a period which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company\n\n### 7. is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company.","sortOrder":31},{"sectionNumber":"Attachment B","sectionType":"division","heading":"Attachment B","content":"### Attachment B\n\n### Compliance Committee for eligible foreign life insurance companies\n\n### Purpose of the Compliance Committee\n\n1.  The purpose of the Compliance Committee (the Committee) is to:\n\n(a) ensure the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act; and\n\n(b) assist the Board of Directors of the EFLIC (the Board) in meeting its responsibilities under the Life Insurance Act.\n\n2. As required by subsections 16ZF(1) and (4) of the Life Insurance Act, the Board must delegate sufficient powers of management to the members of the Committee to enable Committee members to ensure that the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act. The Board must do so irrespective of anything to the contrary in the EFLIC’s constitution.\n\n### Continuing responsibility of the Board\n\n3. Establishment of the Committee does not free the Board from ultimate responsibility for ensuring the Australian branch of the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act.\n\n4. In recognition of this, the Board must:\n\n(a) have the power to appoint and remove, at its discretion, members of the Committee, as long as certain composition and residency requirements pertaining to the Committee continue to be met (refer paragraphs 5 to 8);\n\n(b) ensure that the delegation of relevant managerial powers (of the kind referred to in paragraph 16ZF(1)(a) and (b) of the Life Insurance Act) is not irrevocable, and that the Board retains the powers delegated; and\n\n(c) establish adequate procedures for monitoring and supervising the operation of the Committee, as well as assessing its performance.\n\n### Composition and residency status of Committee members\n\n5. The Committee must comprise of at least five members appointed by the Board. Those members must include:\n\n(a) at least one director of the Board of the EFLIC;\n\n(b) the Principal Executive Officer (PEO) appointed by the EFLIC for its Australian branch under either subsections 20(4) or section 246 of the Life Insurance Act; and\n\n(c) at least two independent members.\n\n6. A member cannot satisfy more than one of the composition requirements contained in subparagraphs 5(a), 5(b) and 5(c) (i.e. the director, PEO and independent members must all be separate individuals).\n\n7. At least two of the Committee members must be ordinarily resident in Australia, one being the PEO and the other an independent member.\n\n8. It should be noted that the definition of director contained in the Life Insurance Act, in relation to an EFLIC, is taken to refer to both members of the Committee and the directors of the EFLIC (except for certain provisions, notably sections 92, 230B and 245 of the Life Insurance Act, where only Committee members are being referred to).\n\n### Application for a modified Committee composition\n\n9. APRA may, on written application from an EFLIC, determine a modified Committee for the EFLIC where it can be demonstrated that it is appropriate to do so.\n\n10. In making this determination, APRA will take into account the following factors:\n\n(a) the quantum of liabilities written by the EFLIC;\n\n(b) the cost effectiveness or otherwise of establishing a Committee;\n\n(c) any restrictions on the lines of business written by the EFLIC;\n\n(d) whether these restrictions limit the number of policyholders of the EFLIC (for example, by targeting specific policyholder characteristics, such as age, nationality or geographical location); and\n\n(e) whether the EFLIC has written any material amount of long tail business.\n\n11. The composition of any modified Committee would be determined in writing on a case by case basis by APRA, but the possible modifications could take one or more of the following forms:\n\n(a) a Committee with fewer than five members;\n\n(b) replacing the director of the Board of the EFLIC as required by subparagraph 5(a) with the PEO; or\n\n(c) a Committee with fewer than two independent members.\n\n### Appointment and removal of Committee members\n\n12. The power to appoint and remove members of the Committee resides with the Board.\n\n13. The Board must have appointed all members and formally constituted the Committee within seven days of receiving notification of registration.\n\n14. Each member of the Committee must be fit and proper for the role.\n\n(Note: The requirements for fitness and propriety are set out in Prudential Standard LPS 520 Fit and Proper Requirements).\n\n15. The Board must ensure that the Committee as a whole possesses the necessary skills and expertise to ensure that the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act, and to discharge the duties and responsibilities of the Committee provided for in this Prudential Standard.\n\n16. The Committee must have a policy for dealing with conflicts of interest.\n\n17. Notwithstanding the Board’s power to appoint and remove members, APRA may, under section 230B of the Life Insurance Act, direct an EFLIC to remove a member of the Committee.\n\n18. While membership of the Committee is the responsibility of the Board, the powers to appoint and remove members of the Committee must not be used in a manner that impedes, discourages or otherwise hinders the Committee from discharging its duties and responsibilities. Examples that would be cause for concern by APRA would be an excessive turnover of members, or the removal of members at inappropriate times (for example at critical reporting periods). If requested to do so, by APRA, an EFLIC must, within a time stipulated by APRA, in writing (which must not be unreasonable), provide a written report to APRA responding to any queries APRA has regarding the removal of members.\n\n### Processes of the Committee\n\n19. At least three members of the Committee are required to be present at a meeting of the Committee to form a quorum. The PEO, and at least one independent member who is ordinarily resident in Australia, must be amongst the three members present.\n\n20. The chairperson of the Committee must be a non-executive member.\n\n21. Resolutions can only be passed by a majority with the chairperson having a casting vote.\n\n22. The Committee must meet as often as required to discharge its duties and responsibilities, although APRA would expect the Committee to meet on at least a quarterly basis. Members, and individuals who may be needed to address the Committee, must be given reasonable notice of pending meetings.\n\n23. The Appointed Actuary is entitled to attend, and the Committee must ensure that they are given reasonable notice of, any meeting of the Committee, to enable them to address members on any matters outlined in subsection 97(4) of the Life Insurance Act if any of these matters are to be considered at a Committee meeting.\n\n24. Written minutes of Committee meetings must be taken and copies kept and made available to APRA on request. Any papers or submissions put to the Committee must likewise be kept and made available to APRA on request.\n\n### Duties and responsibilities of the Committee\n\n25. The Committee must, with the powers delegated to it by the Board, ensure that the EFLIC complies with:\n\n(a) the Life Insurance Act;\n\n(b) the Life Insurance Regulations 1995;\n\n(c) the actuarial standards as determined by the Life Insurance Actuarial Standards Board;\n\n(d) the prudential standards determined under section 230A;\n\n(e) the prudential rules made under section 252;\n\n(f) any conditions placed upon the EFLIC under section 22 at the time, or after, of its registration;\n\n(g) directions given under the Life Insurance Act; and\n\n(h) the Financial Sector (Collection of Data) Act 2001.\n\n26. The Committee members must report to APRA, within 14 business days, of becoming aware:\n\n(a) that the EFLIC has failed to comply with a requirement referred to in paragraph 25; or\n\n(b) the Committee believes there is a material risk of the EFLIC being unable to meet its obligations at some future time.\n\n27. The report must:\n\n(a) be in the form of a written report explaining the causes of the failure or the material risk to the solvency of the EFLIC identified by the Committee; and\n\n(b) outline a plan and timeframe for rectifying the failure or mitigating the risk of insolvency.\n\n28. APRA would expect the Committee to provide a copy of the report to the Board.","sortOrder":32},{"sectionNumber":"Compliance Committee for eligible foreig","sectionType":"division","heading":"Compliance Committee for eligible foreign life insurance companies","content":"### Attachment B\n\n### Compliance Committee for eligible foreign life insurance companies\n\n### Purpose of the Compliance Committee\n\n1.  The purpose of the Compliance Committee (the Committee) is to:\n\n(a) ensure the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act; and\n\n(b) assist the Board of Directors of the EFLIC (the Board) in meeting its responsibilities under the Life Insurance Act.\n\n2. As required by subsections 16ZF(1) and (4) of the Life Insurance Act, the Board must delegate sufficient powers of management to the members of the Committee to enable Committee members to ensure that the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act. The Board must do so irrespective of anything to the contrary in the EFLIC’s constitution.\n\n### Continuing responsibility of the Board\n\n3. Establishment of the Committee does not free the Board from ultimate responsibility for ensuring the Australian branch of the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act.\n\n4. In recognition of this, the Board must:\n\n(a) have the power to appoint and remove, at its discretion, members of the Committee, as long as certain composition and residency requirements pertaining to the Committee continue to be met (refer paragraphs 5 to 8);\n\n(b) ensure that the delegation of relevant managerial powers (of the kind referred to in paragraph 16ZF(1)(a) and (b) of the Life Insurance Act) is not irrevocable, and that the Board retains the powers delegated; and\n\n(c) establish adequate procedures for monitoring and supervising the operation of the Committee, as well as assessing its performance.\n\n### Composition and residency status of Committee members\n\n5. The Committee must comprise of at least five members appointed by the Board. Those members must include:\n\n(a) at least one director of the Board of the EFLIC;\n\n(b) the Principal Executive Officer (PEO) appointed by the EFLIC for its Australian branch under either subsections 20(4) or section 246 of the Life Insurance Act; and\n\n(c) at least two independent members.\n\n6. A member cannot satisfy more than one of the composition requirements contained in subparagraphs 5(a), 5(b) and 5(c) (i.e. the director, PEO and independent members must all be separate individuals).\n\n7. At least two of the Committee members must be ordinarily resident in Australia, one being the PEO and the other an independent member.\n\n8. It should be noted that the definition of director contained in the Life Insurance Act, in relation to an EFLIC, is taken to refer to both members of the Committee and the directors of the EFLIC (except for certain provisions, notably sections 92, 230B and 245 of the Life Insurance Act, where only Committee members are being referred to).\n\n### Application for a modified Committee composition\n\n9. APRA may, on written application from an EFLIC, determine a modified Committee for the EFLIC where it can be demonstrated that it is appropriate to do so.\n\n10. In making this determination, APRA will take into account the following factors:\n\n(a) the quantum of liabilities written by the EFLIC;\n\n(b) the cost effectiveness or otherwise of establishing a Committee;\n\n(c) any restrictions on the lines of business written by the EFLIC;\n\n(d) whether these restrictions limit the number of policyholders of the EFLIC (for example, by targeting specific policyholder characteristics, such as age, nationality or geographical location); and\n\n(e) whether the EFLIC has written any material amount of long tail business.\n\n11. The composition of any modified Committee would be determined in writing on a case by case basis by APRA, but the possible modifications could take one or more of the following forms:\n\n(a) a Committee with fewer than five members;\n\n(b) replacing the director of the Board of the EFLIC as required by subparagraph 5(a) with the PEO; or\n\n(c) a Committee with fewer than two independent members.\n\n### Appointment and removal of Committee members\n\n12. The power to appoint and remove members of the Committee resides with the Board.\n\n13. The Board must have appointed all members and formally constituted the Committee within seven days of receiving notification of registration.\n\n14. Each member of the Committee must be fit and proper for the role.\n\n(Note: The requirements for fitness and propriety are set out in Prudential Standard LPS 520 Fit and Proper Requirements).\n\n15. The Board must ensure that the Committee as a whole possesses the necessary skills and expertise to ensure that the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act, and to discharge the duties and responsibilities of the Committee provided for in this Prudential Standard.\n\n16. The Committee must have a policy for dealing with conflicts of interest.\n\n17. Notwithstanding the Board’s power to appoint and remove members, APRA may, under section 230B of the Life Insurance Act, direct an EFLIC to remove a member of the Committee.\n\n18. While membership of the Committee is the responsibility of the Board, the powers to appoint and remove members of the Committee must not be used in a manner that impedes, discourages or otherwise hinders the Committee from discharging its duties and responsibilities. Examples that would be cause for concern by APRA would be an excessive turnover of members, or the removal of members at inappropriate times (for example at critical reporting periods). If requested to do so, by APRA, an EFLIC must, within a time stipulated by APRA, in writing (which must not be unreasonable), provide a written report to APRA responding to any queries APRA has regarding the removal of members.\n\n### Processes of the Committee\n\n19. At least three members of the Committee are required to be present at a meeting of the Committee to form a quorum. The PEO, and at least one independent member who is ordinarily resident in Australia, must be amongst the three members present.\n\n20. The chairperson of the Committee must be a non-executive member.\n\n21. Resolutions can only be passed by a majority with the chairperson having a casting vote.\n\n22. The Committee must meet as often as required to discharge its duties and responsibilities, although APRA would expect the Committee to meet on at least a quarterly basis. Members, and individuals who may be needed to address the Committee, must be given reasonable notice of pending meetings.\n\n23. The Appointed Actuary is entitled to attend, and the Committee must ensure that they are given reasonable notice of, any meeting of the Committee, to enable them to address members on any matters outlined in subsection 97(4) of the Life Insurance Act if any of these matters are to be considered at a Committee meeting.\n\n24. Written minutes of Committee meetings must be taken and copies kept and made available to APRA on request. Any papers or submissions put to the Committee must likewise be kept and made available to APRA on request.\n\n### Duties and responsibilities of the Committee\n\n25. The Committee must, with the powers delegated to it by the Board, ensure that the EFLIC complies with:\n\n(a) the Life Insurance Act;\n\n(b) the Life Insurance Regulations 1995;\n\n(c) the actuarial standards as determined by the Life Insurance Actuarial Standards Board;\n\n(d) the prudential standards determined under section 230A;\n\n(e) the prudential rules made under section 252;\n\n(f) any conditions placed upon the EFLIC under section 22 at the time, or after, of its registration;\n\n(g) directions given under the Life Insurance Act; and\n\n(h) the Financial Sector (Collection of Data) Act 2001.\n\n26. The Committee members must report to APRA, within 14 business days, of becoming aware:\n\n(a) that the EFLIC has failed to comply with a requirement referred to in paragraph 25; or\n\n(b) the Committee believes there is a material risk of the EFLIC being unable to meet its obligations at some future time.\n\n27. The report must:\n\n(a) be in the form of a written report explaining the causes of the failure or the material risk to the solvency of the EFLIC identified by the Committee; and\n\n(b) outline a plan and timeframe for rectifying the failure or mitigating the risk of insolvency.\n\n28. APRA would expect the Committee to provide a copy of the report to the Board.","sortOrder":33},{"sectionNumber":"Purpose of the Compliance Committee","sectionType":"division","heading":"Purpose of the Compliance Committee","content":"### Purpose of the Compliance Committee\n\n1.  The purpose of the Compliance Committee (the Committee) is to:\n\n(a) ensure the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act; and\n\n(b) assist the Board of Directors of the EFLIC (the Board) in meeting its responsibilities under the Life Insurance Act.\n\n2. As required by subsections 16ZF(1) and (4) of the Life Insurance Act, the Board must delegate sufficient powers of management to the members of the Committee to enable Committee members to ensure that the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act. The Board must do so irrespective of anything to the contrary in the EFLIC’s constitution.","sortOrder":34},{"sectionNumber":"Continuing responsibility of the Board","sectionType":"division","heading":"Continuing responsibility of the Board","content":"### Continuing responsibility of the Board\n\n3. Establishment of the Committee does not free the Board from ultimate responsibility for ensuring the Australian branch of the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act.\n\n4. In recognition of this, the Board must:\n\n(a) have the power to appoint and remove, at its discretion, members of the Committee, as long as certain composition and residency requirements pertaining to the Committee continue to be met (refer paragraphs 5 to 8);\n\n(b) ensure that the delegation of relevant managerial powers (of the kind referred to in paragraph 16ZF(1)(a) and (b) of the Life Insurance Act) is not irrevocable, and that the Board retains the powers delegated; and\n\n(c) establish adequate procedures for monitoring and supervising the operation of the Committee, as well as assessing its performance.","sortOrder":35},{"sectionNumber":"Composition and residency status of Comm","sectionType":"division","heading":"Composition and residency status of Committee members","content":"### Composition and residency status of Committee members\n\n5. The Committee must comprise of at least five members appointed by the Board. Those members must include:\n\n(a) at least one director of the Board of the EFLIC;\n\n(b) the Principal Executive Officer (PEO) appointed by the EFLIC for its Australian branch under either subsections 20(4) or section 246 of the Life Insurance Act; and\n\n(c) at least two independent members.\n\n6. A member cannot satisfy more than one of the composition requirements contained in subparagraphs 5(a), 5(b) and 5(c) (i.e. the director, PEO and independent members must all be separate individuals).\n\n7. At least two of the Committee members must be ordinarily resident in Australia, one being the PEO and the other an independent member.\n\n8. It should be noted that the definition of director contained in the Life Insurance Act, in relation to an EFLIC, is taken to refer to both members of the Committee and the directors of the EFLIC (except for certain provisions, notably sections 92, 230B and 245 of the Life Insurance Act, where only Committee members are being referred to).","sortOrder":36},{"sectionNumber":"Application for a modified Committee com","sectionType":"division","heading":"Application for a modified Committee composition","content":"### Application for a modified Committee composition\n\n9. APRA may, on written application from an EFLIC, determine a modified Committee for the EFLIC where it can be demonstrated that it is appropriate to do so.\n\n10. In making this determination, APRA will take into account the following factors:\n\n(a) the quantum of liabilities written by the EFLIC;\n\n(b) the cost effectiveness or otherwise of establishing a Committee;\n\n(c) any restrictions on the lines of business written by the EFLIC;\n\n(d) whether these restrictions limit the number of policyholders of the EFLIC (for example, by targeting specific policyholder characteristics, such as age, nationality or geographical location); and\n\n(e) whether the EFLIC has written any material amount of long tail business.\n\n11. The composition of any modified Committee would be determined in writing on a case by case basis by APRA, but the possible modifications could take one or more of the following forms:\n\n(a) a Committee with fewer than five members;\n\n(b) replacing the director of the Board of the EFLIC as required by subparagraph 5(a) with the PEO; or\n\n(c) a Committee with fewer than two independent members.","sortOrder":37},{"sectionNumber":"Appointment and removal of Committee mem","sectionType":"division","heading":"Appointment and removal of Committee members","content":"### Appointment and removal of Committee members\n\n12. The power to appoint and remove members of the Committee resides with the Board.\n\n13. The Board must have appointed all members and formally constituted the Committee within seven days of receiving notification of registration.\n\n14. Each member of the Committee must be fit and proper for the role.\n\n(Note: The requirements for fitness and propriety are set out in Prudential Standard LPS 520 Fit and Proper Requirements).\n\n15. The Board must ensure that the Committee as a whole possesses the necessary skills and expertise to ensure that the EFLIC complies with the requirements in, or imposed under, the Life Insurance Act, and to discharge the duties and responsibilities of the Committee provided for in this Prudential Standard.\n\n16. The Committee must have a policy for dealing with conflicts of interest.\n\n17. Notwithstanding the Board’s power to appoint and remove members, APRA may, under section 230B of the Life Insurance Act, direct an EFLIC to remove a member of the Committee.\n\n18. While membership of the Committee is the responsibility of the Board, the powers to appoint and remove members of the Committee must not be used in a manner that impedes, discourages or otherwise hinders the Committee from discharging its duties and responsibilities. Examples that would be cause for concern by APRA would be an excessive turnover of members, or the removal of members at inappropriate times (for example at critical reporting periods). If requested to do so, by APRA, an EFLIC must, within a time stipulated by APRA, in writing (which must not be unreasonable), provide a written report to APRA responding to any queries APRA has regarding the removal of members.","sortOrder":38},{"sectionNumber":"Processes of the Committee","sectionType":"division","heading":"Processes of the Committee","content":"### Processes of the Committee\n\n19. At least three members of the Committee are required to be present at a meeting of the Committee to form a quorum. The PEO, and at least one independent member who is ordinarily resident in Australia, must be amongst the three members present.\n\n20. The chairperson of the Committee must be a non-executive member.\n\n21. Resolutions can only be passed by a majority with the chairperson having a casting vote.\n\n22. The Committee must meet as often as required to discharge its duties and responsibilities, although APRA would expect the Committee to meet on at least a quarterly basis. Members, and individuals who may be needed to address the Committee, must be given reasonable notice of pending meetings.\n\n23. The Appointed Actuary is entitled to attend, and the Committee must ensure that they are given reasonable notice of, any meeting of the Committee, to enable them to address members on any matters outlined in subsection 97(4) of the Life Insurance Act if any of these matters are to be considered at a Committee meeting.\n\n24. Written minutes of Committee meetings must be taken and copies kept and made available to APRA on request. Any papers or submissions put to the Committee must likewise be kept and made available to APRA on request.","sortOrder":39},{"sectionNumber":"Duties and responsibilities of the Commi","sectionType":"division","heading":"Duties and responsibilities of the Committee","content":"### Duties and responsibilities of the Committee\n\n25. The Committee must, with the powers delegated to it by the Board, ensure that the EFLIC complies with:\n\n(a) the Life Insurance Act;\n\n(b) the Life Insurance Regulations 1995;\n\n(c) the actuarial standards as determined by the Life Insurance Actuarial Standards Board;\n\n(d) the prudential standards determined under section 230A;\n\n(e) the prudential rules made under section 252;\n\n(f) any conditions placed upon the EFLIC under section 22 at the time, or after, of its registration;\n\n(g) directions given under the Life Insurance Act; and\n\n(h) the Financial Sector (Collection of Data) Act 2001.\n\n26. The Committee members must report to APRA, within 14 business days, of becoming aware:\n\n(a) that the EFLIC has failed to comply with a requirement referred to in paragraph 25; or\n\n(b) the Committee believes there is a material risk of the EFLIC being unable to meet its obligations at some future time.\n\n27. The report must:\n\n(a) be in the form of a written report explaining the causes of the failure or the material risk to the solvency of the EFLIC identified by the Committee; and\n\n(b) outline a plan and timeframe for rectifying the failure or mitigating the risk of insolvency.\n\n28. APRA would expect the Committee to provide a copy of the report to the Board.","sortOrder":40}],"analysis":{"kimi_summary":{"_metrics":{"model":"kimi-k2.5","source":"moonshot-realtime","completionTokens":1969},"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":false,"description":"The standard maintains its original scope as a governance-specific prudential standard. It addresses board composition, audit committees, internal audit, auditor independence, and performance assessment for life insurers without significant expansion into unrelated operational areas."},"complexity_factors":["Multiple entity classifications with tiered requirements (local, foreign-owned, subsidiaries of APRA-regulated parents, subsidiaries of non-regulated parents, EFLICs)","Seven-part statutory test for director independence incorporating external ASX Corporate Governance Principles","Cross-references to three separate Acts (Life Insurance Act, Corporations Act 2001, Financial Sector (Shareholdings) Act 1998)","Conditional logic for board representation based on 15% shareholding thresholds","Dual governance tracks: full Board requirements for domestic companies vs Compliance Committee model for foreign insurers","Transitional arrangements with staged commencement dates and grandfathering provisions for existing auditors"],"plain_english_summary":"LPS 510 is a prudential standard under the Life Insurance Act 1995 that sets minimum governance expectations for authorised life insurers in Australia, including local companies and branches of eligible foreign life insurers. \n\nIt mandates strong independent oversight, robust audit and internal control arrangements, whistleblower protections, and tailored compliance arrangements for foreign branches to help ensure insurers are competently governed and policyholders’ interests are protected."},"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":true,"description":"The Standard consolidates governance and audit matters into a single prudential instrument and modifies the prior coverage of related rules: it removes overlapping audit matters from Prudential Standard PS 6.3C (para 61), introduces auditor rotation and independence obligations applied at commencement with specified transitional relief (para 63), and formalises a separate compliance‑committee regime for eligible foreign life insurers limited to their Australian business (Application, paras 2–3; Attachment B)."},"complexity_factors":["Detailed board composition, independence and residency requirements (paras 14–23, 16–21)","Different rules and concessions for subsidiaries, group entities and joint ventures (paras 24–29)","Comprehensive Audit Committee duties, membership rules and powers including access rights (paras 30–44)","Mandatory internal audit function with APRA exemption power and alternative arrangements (paras 45–46)","Extensive auditor independence, rotation and cooling‑off rules with APRA exemption routes (paras 47–55, 63)","Specific EFLIC compliance committee regime with composition, delegation and reporting duties (Attachment B, paras 1–28)","Significant cross‑references to other statutes and standards (Life Insurance Act, Corporations Act, Financial Sector (Shareholdings) Act, ASX principles) increasing interpretive complexity (Authority, paras 1; Independence, para 11; Board representation, para 22; auditor rules, para 47)","APRA discretionary powers to grant exemptions, approve modified committee composition, request reports and direct removals (Attachment B paras 9, 17; paras 45, 62, 63)","Transitional arrangements and phased application creating temporary exceptions and timing rules (paras 60–63)"],"plain_english_summary":"This Prudential Standard prescribes minimum governance rules for all APRA‑authorised life insurers: board size and majority independence, an independent chair, audit committee requirements, a resourced internal audit, auditor independence and procedures for board renewal and performance. It applies in full to local life companies and in part to eligible foreign life insurers (EFLICs). Mechanically, it reallocates compliance costs to life companies (board composition, audits, resident senior managers), increases APRA oversight and creates processes for exemptions and transitional arrangements."}},"importantCases":[],"_links":{"self":"/api/acts/life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance","history":"/api/acts/life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance/history","analysis":"/api/acts/life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance/analysis","conflicts":"/api/acts/life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance/conflicts","importantCases":"/api/acts/life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance/important-cases","documents":"/api/acts/life-insurance-prudential-standard-determination-no-2-of-2006-prudential-standard-lps-510-governance/documents"}}