This instrument determines Prudential Standard CPS 320 Actuarial and Related Matters and revokes the previous 2018 determination (see the instrument preamble). It is made by a delegate of APRA under section 32 of the Insurance Act 1973, section 230A of the Life Insurance Act 1995 and section 92 of the Private Health Insurance (Prudential Supervision) Act 2015, and it commences on 1 January 2024 (preamble; Authority; para 4). CPS 320 applies to all general insurers, parent entities of Level 2 insurance groups, life companies including friendly societies and eligible foreign life insurance companies, and private health insurers, except where an attachment or the Standard states otherwise (para 2).

Mechanically, the Standard imposes a discrete regulatory architecture for actuarial functions inside regulated insurers. It requires insurers to appoint an Appointed Actuary (or, for Level 2 groups, a Group Actuary) and to establish a board-approved actuarial advice framework that sets materiality policies, identifies when actuarial input is required and specifies the circumstances in which advice must be considered by the board (paras 9, 11, 22-23). The Appointed Actuary must prepare two recurring reports: an annual Financial Condition Report assessing an insurer’s current and future financial condition across specified topics and, for general insurers and life companies, an annual Actuarial Valuation Report that calculates insurance liabilities and (for life companies) capital base and prescribed capital amount (paras 24-29; 30-33). Private health insurers are subject to parallel valuation and reporting requirements tailored in Attachment C (Attachments C1-C4).

The Standard sets procedural and governance requirements that allocate information flows, decision points and obligations: insurers must provide actuaries with necessary information and access to committees, auditors, senior management and the board (paras 18-19). Appointed Actuaries and other actuaries subject to prudential requirements must be impartial and expert, having regard to Actuaries Institute professional standards except where inconsistent with CPS 320 (para 17). Fit and proper criteria in Prudential Standard CPS 520 apply to Appointed Actuaries and to Group Actuaries, and actuaries undertaking prudential functions must be Fellows or Accredited Members of the Actuaries Institute (paras 10, 20).

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Commonwealth Coat of Arms of Australia

Insurance, Life Insurance and Health Insurance (prudential standard) determination No. 1 of 2023

Prudential Standard CPS 320 Actuarial and Related Matters

Insurance Act 1973

Life Insurance Act 1995

Private Health Insurance (Prudential Supervision) Act 2015

I, Clare Gibney, a delegate of APRA:

(a) under subsections 32(4) of the Insurance Act 1973, 230A(5) of the Life Insurance Act 1995 and 92(5) of the Private Health Insurance (Prudential Supervision) Act 2015 REVOKE Insurance, Life Insurance and Health Insurance (prudential standard) determination No. 1 of 2018, including Prudential Standard CPS 320 Actuarial and Related Matters, made under that determination;

(b) under subsection 32(1) of the Insurance Act 1973 DETERMINE the prudential standard, which applies to all general insurers, authorised NOHCs, and subsidiaries of general insurers or authorised NOHCs where those subsidiaries are parent entities of Level 2 insurance groups;

(c) under subsection 230A(1) of the Life Insurance Act 1995 DETERMINE the prudential standard, which applies to all life companies, including friendly societies; and

(d) under subsection 92(1) of the Private Health Insurance (Prudential Supervision) Act 2015 DETERMINE the prudential standard, which applies to all private health insurers.

This instrument commences on 1 January 2024.

Dated: 21 November 2023

Clare Gibney

Executive Director

Policy and Advice Division

Interpretation

In this Determination:

APRA means the Australian Prudential Regulation Authority.

authorised NOHC has the meaning given in section 3(1) of the Insurance Act 1973.

friendly society has the meaning given in section 16C of the Life Insurance Act 1995.

general insurer has the meaning given in section 11 of the Insurance Act 1973.

Level 2 insurance group has the meaning given in Prudential Standard GPS 001 Definitions.

life company has the meaning given in the Schedule - Dictionary to the Life Insurance Act 1995.

parent entity has the meaning given in Prudential Standard GPS 001 Definitions.

private health insurer has the meaning given in section 4 of the Private Health Insurance (Prudential Supervision) Act 2015.

subsidiary has the meaning given in Prudential Standard GPS 001 Definitions.

the prudential standard means Prudential Standard CPS 320 Actuarial and Related Matters in the form set out in the Schedule.

Schedule – the prudential standard

Prudential Standard CPS 320 Actuarial and Related Matters comprises the document commencing on the following page.

Commonwealth Coat of Arms of Australia

Prudential Standard CPS 320

Actuarial and Related Matters

Objectives and key requirements of this Prudential Standard This Prudential Standard aims to ensure that a general insurer, life company or private health insurer has access to appropriate actuarial advice to assist in the sound and prudent operation of its business. It sets out the requirements for insurers to appoint an Appointed Actuary and to establish a framework for the provision of actuarial advice. It also sets out the functions of the Appointed Actuary role. The purpose of the Appointed Actuary role is to ensure that the board and senior management have unfettered access to expert and impartial actuarial advice and review. The role is intended to assist with the sound and prudent management of an insurer and ensure that the insurer gives appropriate consideration to the protection of policyholder interests. The Appointed Actuary must have the necessary authority, seniority and support to contribute to the debate of strategic issues at a senior management level and provide advice that is considered by the board. The Appointed Actuary plays a key role in, and provides effective challenge to, the activities and decisions that may materially affect the insurer’s financial condition, as well as policyholder interests. Some of the key requirements of this Prudential Standard are: an insurer must establish an actuarial advice framework;an insurer must provide the Appointed Actuary with sufficient information, and access to the board and senior management, to allow the Appointed Actuary to fulfil specified roles and functions;an Appointed Actuary must provide advice to the insurer on the valuation of the insurance liabilities, the insurer’s financial condition, and matters specified under the insurer’s actuarial advice framework, consistent with the insurer’s materiality policy;the Appointed Actuary must assess the insurer’s financial condition and annually prepare a Financial Condition Report;an insurer must submit a copy of the Financial Condition Report to APRA;the Appointed Actuary must provide advice on the valuation of insurance liabilities, and Appointed Actuaries of general insurers and life companies must annually prepare an Actuarial Valuation Report; anda general insurer or life company must submit a copy of the Actuarial Valuation Report to APRA.

Table of Contents

Obligations of the Appointed Actuary and other actuaries subject to prudential requirements

Insurers’ obligations with respect to actuaries

Actuarial advice framework

Financial Condition Report

Actuarial Valuation Report

Departures from actuarial advice

Actuarial reviews required by APRA

Adjustments and exclusions

Determinations made under previous prudential standards

Attachment A – General insurance matters

Attachment B – Life insurance matters

Attachment C – Private health insurance matters

Authority

This Prudential Standard is made under:

(a) section 32 of the Insurance Act 1973 (Insurance Act) in relation to general insurers and parent entities of Level 2 insurance groups;[1]

(b) section 230A of the Life Insurance Act 1995 (Life Insurance Act) in relation to life companies, including friendly societies; and

(c) section 92 of the Private Health Insurance (Prudential Supervision) Act 2015 (PHIPS Act) in relation to private health insurers.

Application

2. This Prudential Standard applies to:

(a) all general insurers, including parent entities of Level 2 insurance groups;

(b) all life companies, including friendly societies and eligible foreign life insurance companies (EFLICs); and

except where otherwise stated.

These institutions are collectively referred to as ‘insurers’ in this Prudential Standard.

3. The obligations placed on Appointed Actuaries by this Prudential Standard are functions of an Appointed Actuary for the purposes of section 49K(1)(a) of the Insurance Act, section 97(1) of the Life Insurance Act and section 107(2) of the PHIPS Act.

4. This Prudential Standard commences on 1 January 2024.

Interpretation

5. Where this Prudential Standard imposes requirements or functions on the Appointed Actuary, those requirements or functions must be met by the Appointed Actuary. Otherwise, the insurer may, subject to the requirements of this Prudential Standard, use other actuaries to undertake actuarial functions required under this Prudential Standard.

6. In this Prudential Standard:

a) Terms that are defined in Prudential Standard GPS 001 Definitions (GPS 001), Prudential Standard LPS 001 Definitions (LPS 001) and Prudential Standard HPS 001 Definitions (HPS 001) appear in bold the first time they are used in this Prudential Standard and adopt the same meaning in this Prudential Standard as defined in those Prudential Standards; and

b) unless the contrary intention appears, a reference to an Act, Regulations or Prudential Standard is a reference to the Act, Regulations or Prudential Standard as in force from time to time.

7. Terms used in this Prudential Standard are defined as follows:

(a) ‘Acts’ refers collectively to the Insurance Act, Life Insurance Act and PHIPS Act;

(b) ‘Actuarial Professional Standard’ refers to a professional standard of the Institute of Actuaries of Australia as in place from time to time;

(c) ‘Appointed Actuary’ refers to the person appointed under section 39 of the Insurance Act, section 93 of the Life Insurance Act, or section 106 of the PHIPS Act, and includes a person appointed as a Group Actuary under this Prudential Standard unless otherwise stated;

(d) ‘Attachment’ refers to one or more of the attachments to this Prudential Standard, namely Attachment A (General insurance matters), Attachment B (Life insurance matters) and Attachment C (Private health insurance matters);

(e) ‘Board’ refers, in the case of a Category C insurer or an EFLIC, to the senior officer outside of Australia or Compliance Committee (as applicable) as referred to in Prudential Standard CPS 510 Governance (CPS 510) and otherwise adopts the definitions in GPS 001, LPS 001 and HPS 001;

(f) ‘Fund’ refers to a statutory fund or a general fund of a life company;

(g) ‘General insurer’ refers to general insurers as defined in section 11 of the Insurance Act, non-operating holding companies authorised under the Insurance Act (authorised insurance NOHCs) and the parent entities of Level 2 insurance groups;

(h) ‘Group Actuary’ refers to the person appointed under this Prudential Standard as an Appointed Actuary of a Level 2 insurance group;

(i) ‘Health benefits fund’ refers to a health benefits fund of a private health insurer;

(j) ‘Insurance liabilities’ refers to the ‘insurance liabilities’ of general insurers determined in accordance with Prudential Standard GPS 340 Insurance Liability Valuation (GPS 340), ‘policy liabilities’ of life companies determined in accordance with Prudential Standard LPS 340 Valuation of Policy Liabilities (LPS 340) and ‘insurance liabilities’ of private health insurers determined in accordance with Prudential Standard HPS 340 Insurance Liability Valuation (HPS 340);

(k) ‘Life company’ refers to a life company as defined in the Schedule to the Life Insurance Act (includes a friendly society and an EFLIC);

(l) ‘Private Health Insurer’ has the same meaning as in section 4 of the PHIPS Act;

(m) ‘Prudential requirement’ refers to the requirements imposed under the Acts, Regulations, prudential standards determined under the Acts, the Financial Sector (Collection of Data) Act 2001 (FSCODA), reporting standards made under the FSCODA, and conditions, directions, Rules and other requirements imposed by APRA in writing under the Acts; and

(n) ‘Regulation’ refers to any regulation made under any of the Acts.

8. Where this Prudential Standard provides:

(a) for APRA to exercise a power or discretion, the power or discretion is to be exercised in writing; or

(b) that an insurer must provide APRA with notice, that notice must be given in writing.

Appointment

9. Under the Acts, an insurer must appoint an Appointed Actuary.[2]

10. An insurer must ensure that its Appointed Actuary:

(a) satisfies the eligibility criteria; and

(b) is a fit and proper person,

in accordance with Prudential Standard CPS 520 Fit and Proper (CPS 520), as applicable, and the insurer’s fit and proper policy.

Group Actuaries

11. A Level 2 insurance group must appoint a Group Actuary.

12. A Level 2 insurer must ensure that its Group Actuary satisfies the requirements of paragraph 10 of this Prudential Standard and, in addition, the provisions of Attachment A that relate to the appointment of a Group Actuary.

13. The terms of this Prudential Standard that apply to an Appointed Actuary include a Group Actuary, unless otherwise stated.

14. Any obligation this Prudential Standard places on a Group Actuary requires the parent entity of a Level 2 insurance Group to ensure that the Group Actuary complies with the obligation.[3]

15. A Level 2 insurance group must comply with this Prudential Standard in its capacity as an APRA-regulated institution and on a group basis, unless otherwise stated.

Obligations of the Appointed Actuary and other actuaries subject to prudential requirements

16. The Appointed Actuary of an insurer has specific obligations set out in the prudential requirements. Notwithstanding any provision of this Prudential Standard, those obligations must continue to be met by the Appointed Actuary.

17. An Appointed Actuary and any other actuary subject to prudential requirements must perform the functions:

(a) impartially; and

(b) expertly, having regard to relevant Actuarial Professional Standards to the extent that they are not inconsistent with the requirements of this Prudential Standard.[4]

Insurers’ obligations with respect to actuaries

18. An insurer must do all things necessary to enable the Appointed Actuary or any other actuary performing functions under the prudential requirements, including this Prudential Standard, to comply with those requirements, including:

(a) ensuring the actuary is fully informed of the prudential requirements that apply to the insurer;

(b) providing to the actuary information that the actuary reasonably believes is necessary to fulfil their role and functions; and

(c) providing to the actuary any information that APRA has given to the insurer that may assist the actuary to fulfil his or her role and functions.

19. An insurer must provide the Appointed Actuary with access to the insurer’s committees, internal auditors, external auditors, senior management and others as requested.[5]

20. An insurer must ensure that any actuary performing functions under the prudential requirements is assessed as fit and proper in accordance with CPS 520 (as applicable) and must be a Fellow or Accredited Member of the Actuaries Institute.[6]

21. An insurer must take all reasonable steps to ensure that all working papers and other documentation of:

(a) an Appointed Actuary in relation to the prudential requirements; or

(b) an actuary appointed under paragraph 36 in relation to an actuarial review conducted under paragraph 35,

are retained for a period of seven years. An insurer must also ensure that the person or entity who holds such working papers and documentation provides those papers and documents to APRA when requested to do so in writing.

Actuarial advice framework

22. An insurer must have a board-approved framework for the provision of actuarial advice (actuarial advice framework) that enables the Appointed Actuary to perform the functions of the role and that complies with the applicable prudential requirements. Before approving the actuarial advice framework, the board must consider advice provided by the Appointed Actuary in relation to the actuarial advice framework.

23. The actuarial advice framework must be appropriately documented and:

(a) include a materiality policy;

(b) identify areas where the advice of an actuary is required, having regard to the materiality policy and the minimum matters to be included in the actuarial advice framework for each type of insurer as set out in the Attachments, as applicable;

(c) specify when advice must specifically be given by the Appointed Actuary rather than another actuary, having regard to the materiality of the matter;

(d) specify by whom actuarial advice must be considered (in particular, the circumstances in which it must be considered by the board), having regard to the materiality policy;

(e) set out the insurer’s approach to managing potential conflicts of interest or duty in the Appointed Actuary role and in the operation of the actuarial advice framework; and

(f) set out the insurer’s approach to seeking actuarial advice on reviews of the:

(i) risk management framework[7]; and

(ii) Internal Capital Adequacy Assessment Process (ICAAP) of a general insurer, life company or private health insurer.

Financial Condition Report

24. An insurer[8] must arrange for its Appointed Actuary to:

(a) assess the financial condition of the insurer including the financial condition of each of the funds of a life company and each of the health benefits funds of a private health insurer; and

(b) report on that assessment in a written Financial Condition Report (FCR). [9]

25. Subject to paragraph 26, an Appointed Actuary must include the following information in the FCR:

(a) a business overview including the background, structure, strategy and operations of the insurer;

(b) a summary of:

(i) for a life company or general insurer, the key results of the Actuarial Valuation Report (AVR) required under paragraph 30 of this Prudential Standard;

(ii) for a private health insurer, the insurance liability valuation;

(d) an assessment of the suitability and adequacy of the insurer’s reinsurance strategy;

(e) an assessment of the appropriateness of the investment strategy, having regard to the nature of the insurance liabilities;

(f) an assessment of the actual experience and performance compared to the expected experience and performance of the insurer;

(g) general observations on the overall risk management framework, with a focus on financial risks, and how these risks are managed by the insurer;

(h) general observations on the insurer’s approach to capital management;

(i) an assessment of the insurer’s current and future profitability and capital adequacy:

(i) for general insurers, this includes an assessment of the adequacy of the calculation of the insurance concentration risk charge;[10]

(ii) for life companies, this includes a summary of the Appointed Actuary’s advice on the calculation of the value of the capital base and prescribed capital amount for each of the funds of the life company; and

(iii) for private health insurers, this includes an assessment of the calculation of the Future Exposure Risk Charge (FER)[11].

(j) the equitable treatment of life insurance participating policyholders;

(k) for life companies, any material guarantees in investment-linked statutory funds;

(l) comment on the concerns, if any, that an Appointed Actuary has in relation to the operation and effectiveness of the actuarial advice framework, whether the materiality policy has worked effectively or how the insurer has used actuaries other than the Appointed Actuary; and

(m) any other matters considered relevant and material to the insurer’s current and future financial condition.

26. The Appointed Actuary must exercise judgement about the matters which are relevant and material to include in the FCR. If, having considered a matter prescribed in paragraph 25 the Appointed Actuary concludes that that matter is not sufficiently relevant and/or material to include in the FCR, the Appointed Actuary must state briefly in the FCR why that matter is not sufficiently relevant and/or material to include in the FCR.

27. The Appointed Actuary must consider the future outlook and implications for each matter listed in paragraph 25. Where these implications are adverse, the Appointed Actuary must propose recommendations designed to address the issues.

28. Where relevant, the Appointed Actuary must prepare the FCR in respect of the:

(a) Australian branch operation for Category C general insurers, but with consideration given to the financial position of the head office; or

(b) life insurance business carried on inside Australia by an EFLIC, but with consideration given to the financial condition of the life insurance business carried on outside Australia by the company.

29. The Appointed Actuary must prepare the FCR annually and provide it to the insurer within such time as to give the board a reasonable opportunity to consider and use the information to prepare the insurer’s annual regulatory financial statements. The insurer must provide the FCR to APRA within three months of the end of the period to which the report relates.

Actuarial Valuation Report

30. A general insurer or life company must arrange for its Appointed Actuary to:

(a) calculate the value of the insurance liabilities and, if the insurer is a life company, the value of the insurance liabilities of each of the funds of the life company;

(b) for a life company, calculate the value of the capital base and prescribed capital amount for each of the funds of the life company; and

31. The Appointed Actuary must include the following information in the AVR:

(a) the values listed in 30(a) and (b);

(b) a statement on the completeness and accuracy of data and information relied on to derive the required values;

(c) the methodologies and assumptions used to determine those values, including the key risks or limitations of the methodologies and assumptions used;

(d) significant aspects of recent experience and the affect it has on the valuation of insurance liabilities; and

(e) any other matters that a prudential standard requires to be included in the insurer's AVR.

32. The Appointed Actuary must exercise judgement about the matters which are relevant and material to include in the AVR.

33. The Appointed Actuary of a general insurer or life company must prepare the AVR annually as at the company balance date. The insurer must provide the AVR to APRA within three months of the end of the period to which the report relates.

Departures from actuarial advice

34. If the Appointed Actuary advises:

(a) an insurer on a value for insurance liabilities;[12]

(b) a general insurer on the adequacy of the calculation of the insurance concentration risk charge;

(d) a private health insurer on the calculation of the FER ;

and the insurer does not accept the advice of the Appointed Actuary in a material respect, then the insurer must notify APRA of the non-acceptance on or before the day that the insurer’s annual regulatory financial statements are required to be submitted to APRA. In the case of advice provided on insurance liabilities outside of the FCR or AVR, the insurer must notify APRA within ten business days.

Actuarial reviews required by APRA

35. If requested by APRA, an insurer must arrange for:

(a) an actuarial review of any matters specified by APRA; and

(b) the preparation of a report in respect of that review containing all matters specified by APRA.

36. An actuarial review under paragraph 35 must be undertaken by:

(a) the insurer’s Appointed Actuary; or

(b) another actuary,

as specified by APRA.

37. An actuary other than the Appointed Actuary appointed to undertake a review under paragraph 35 must meet the criteria applicable to Appointed Actuaries in paragraph 10 and meet the requirements of paragraph 17. The insurer must also comply with the requirements of paragraphs 18 to 21 in respect of an actuary undertaking a review.

38. An insurer must ensure that a copy of the report:

(a) is submitted to APRA and the insurer simultaneously within three months of being commissioned, unless specified otherwise by APRA; and

(b) is provided to the Appointed Actuary (if the Appointed Actuary did not prepare the report), the external auditor, the board, and the senior management of the insurer, unless specified otherwise by APRA.

39. The cost of a review under paragraph 35 is to be borne by the insurer.

40. An insurer must ensure that any actuary other than the Appointed Actuary who is undertaking an actuarial review under paragraph 35, is given full access to the insurer’s Appointed Actuary and any actuarial advice or report which is to be reviewed.

Adjustments and exclusions

41. APRA may adjust or exclude a specific requirement in this Prudential Standard in relation to a particular insurer, group of insurers, Appointed Actuary or other actuary subject to this Prudential Standard.

Determinations made under previous prudential standards

42. An exercise of APRA’s discretion (such as an approval, waiver or direction) under a previous Appointed Actuary Prudential Standard (Prudential Standard GPS 320 Actuarial and Related Matters (GPS 320), Prudential Standard LPS 320 Actuarial and Related Matters (LPS 320), Prudential Standard HPS 320 Actuarial and Related Matters (HPS 320), or a previous version of this Prudential Standard) continues to have effect as though exercised pursuant to a corresponding power (if any) exercisable by APRA under this Prudential Standard.

Attachment A – General insurance matters

Actuarial advice framework of general insurers

The actuarial advice framework of a general insurer must, for the purposes of paragraph 23 of this Prudential Standard include the following matters:

(a) the central estimate of insurance liabilities and the value of liabilities that provides a 75 per cent probability of sufficiency, both overall and in respect of each class of business underwritten by the insurer;

(b) for the purposes of Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115), the most appropriate category or categories in which to assign ‘other’ insurance business that does not fit within the definition of the classes of business in GPS 001;

(c) for the purposes of Prudential Standard GPS 116 Capital Adequacy: Insurance Concentration Risk Charge (GPS 116), the portion of the net premiums liability provision which relates to catastrophic losses (PL offset) using the method prescribed in GPS 116 and relevant for the period following the FCR;

(d) where the insurer is required to determine the other accumulations vertical requirement under GPS 116, the amount of losses within the other accumulations scenario that has already been allowed for in the insurer’s net premiums liabilities;

(e) for a lenders mortgage insurer that is required to determine the Lenders Mortgage Insurance Concentration Risk Charge under GPS 116, the amount of net premiums liabilities that relates to an economic downturn;

(f) planned capital reductions, in the case of run-off insurers; and

(g) any other matter required under the prudential standards and the Insurance Act.

Exemptions from appointing an Appointed Actuary

2. An insurer is not required to appoint an Appointed Actuary if:

(a) the insurer seeks a determination of exemption from APRA; and[13]

(b) the insurer is a small insurer or a general insurer to which exceptional circumstances apply; and

3. An application for an exemption made under paragraph 2 of this Attachment by a small insurer must include documentary evidence that the criteria to be a small insurer under GPS 001 have been met, and an attestation from the chief executive officer[14] (CEO) that it will meet those same criteria for the next 12 months.

4. A small insurer that has been granted an exemption by APRA must annually submit an attestation to APRA in writing from the CEO of the small insurer that the insurer has met the criteria to be a small insurer under GPS 001 for the previous 12 months and expects to meet those same criteria for the following 12 months to maintain the exemption.

Appointment of a Group Actuary

5. An actuary is not eligible to be appointed as a Group Actuary if the actuary is:

(a) the Group Auditor;

(b) the auditor of an entity within the Level 2 insurance group carrying on insurance business;

(c) an employee or director of an entity of which a person referred to in Attachment A subparagraph 5(a) or (b) is an employee or director;

(d) a partner of a person referred to in Attachment A subparagraph 5(a) or (b);

(e) the CEO or director of any entity within the Level 2 insurance group or its wider group (where applicable).

FCRs for Level 2 insurance groups

6. An FCR must be completed in respect of each insurer within a Level 2 group unless paragraph 7 of this Attachment applies.

7. An insurer may submit to APRA a single FCR in respect of a Level 2 insurance group where:

(a) the Appointed Actuary completing the FCR is the Appointed Actuary for each insurer included in the insurance group FCR; or

(b) it is practical to produce a single FCR for the insurance group.

8. The insurance group FCR must adequately consider and address the operations of each insurer in that insurance group.

9. APRA may require the Appointed Actuary to prepare and submit to APRA:

(a) a separate FCR for one or more insurers within the insurance group; and/or

(b) an FCR for a different insurance group within the corporate group

by a time specified by APRA.

AVRs for Level 2 insurance groups

10. A Level 2 insurance group must ensure its Group Actuary, on an annual basis, undertakes an investigation to enable the preparation of an AVR.

11. A Level 2 insurance group must seek the advice of its Group Actuary for an actuarial assessment of the group’s insurance liabilities for each half-yearly report submitted to APRA.

12. The AVR for a Level 2 insurance group must contain the information required by paragraphs 30 and 31 of this Prudential Standard and must also:

(a) comment on the suitability of accounting figures for overseas business relative to the requirements of this Prudential Standard; and

(b) contain any other matters that a prudential standard requires to be included in the Level 2 insurance group AVR.

13. Where this Prudential Standard requires a Level 2 insurance group to ensure that its Group Actuary performs a particular task or service or complies with a requirement, the parent entity of a Level 2 insurance group must ensure the contract engaging the Group Actuary (if external to the Level 2 insurance group) includes a term requiring the Group Actuary to perform the task or service or comply with the requirement.

Run-off insurers

14. If the insurer is a run-off insurer, the primary role of the Appointed Actuary is to:

(a) advise on the valuation of the insurer’s insurance liabilities;

(b) demonstrate that the tangible assets of the insurer, after any proposed capital reduction, are sufficient to cover its insurance liabilities to a 99.5 per cent level of sufficiency; and

15. The obligation for the Appointed Actuary to review a run-off insurer’s run-off plan replaces the requirement for the Appointed Actuary to prepare a FCR under the Prudential Standards, provided that:

(a) the run-off insurer prepares a run-off plan; and

(b) the Appointed Actuary prepares a report of the review of the run-off plan.

16. If an insurer is a run-off insurer, paragraphs 24 to 29 of this Prudential Standard should be read as if the term ‘Review of Run-off plan’ replaces ‘FCR’. Where APRA is of the view that a run-off plan is not adequate in a particular case, APRA may require that the Appointed Actuary prepare an FCR with respect to the run-off insurer.

17. A review of a run-off insurer’s run-off plan must include the Appointed Actuary’s opinion on whether the run-off plan and supporting financial projections are reasonable and adequate, and, if not, recommendations to address the issues.

Attachment B – Life insurance matters

Actuarial advice framework of life companies

The actuarial advice framework of a life company must, for the purposes of paragraph 23 of this Prudential Standard include the following matters:

(a) the methodology and assumptions for determining the capital base, prescribed capital amount and policy liabilities, including details of the stress margins applied in determining the insurance risk charge;

(b) changes to the investment strategy, including asset-liability management in respect of participating business and business with discretionary participation features;

(i) the proposed terms and conditions on which a policy is to be issued or modified;

(ii) the proposed basis on which the surrender value is to be determined;

(iii) if the policy provides for benefits to be calculated by reference to units, the proposed means by which the unit values are to be determined;

(iv) if the life company is a friendly society, the proposed approved benefit fund rules or modification of the benefit fund rules, and whether the benefit fund rules will result in unfairness to any prospective or existing members of the benefit fund; and

(v) if the life company is a friendly society, any change to the investment management or strategy of an approved benefit fund beyond that disclosed in the approved benefit fund rules;

(d) changes to the reinsurance strategy, new reinsurance arrangements, or changes to existing reinsurance contracts, specifically advising on the likely consequences of taking such action; and

(e) any other matter required under the prudential standards and Life Act.[15]

Attachment C – Private health insurance matters

Actuarial advice framework of private health insurers

The actuarial advice framework of a private health insurer must, for the purposes of paragraph 23 of this Prudential Standard include the following matters:

(a) the insurance liability valuation methodology;

(b) the valuation of insurance liabilities of each health benefits fund;

(d) the determination of risk margins for annual financial statements;

(e) proposed changes to rates of premiums charged under a product of a health benefits fund conducted by the private health insurer;

(f) proposed changes to the benefits provided under a product of a health benefits fund conducted by the private health insurer;

(g) redevelopment or revision of the strategic or business plans of the private health insurer;

(h) redevelopment or revision of the strategic or business plans of a health benefits fund conducted by the private health insurer,

(i) development of new products of health benefits fund run by the private health insurer;

(j) revision of an existing product of a health benefits fund conducted by the insurer;

(k) changes to the investment policies of the private health insurer;

(l) redetermination of the risk profile of the private health insurer;

(m) any other event that the private health insurer reasonably expects to have a significant impact on the conduct of the business of a health benefits fund of the insurer;

(n) business diversification activity; and

(o) any other matter required under the prudential standards and PHIPS Act.

[1] A reference to a Level 2 insurance group is a general insurance Level 2 insurance group as defined in GPS 001.

[2] A general insurer may make an application to be exempt from this requirement under the provisions of Attachment A.

[3] Attachment A contains obligations specific to Group Actuaries and requirements specific to the parent entities of Level 2 insurance groups.

[4] The provisions of this Prudential Standard prevail to the extent of any inconsistency with the Actuarial Professional Standards.

[5] This includes providing access to the board and board committees of any entity within a Level 2 insurance group, where relevant.

[6] Note that CPS 520 sets additional criteria for fitness and propriety that apply to Appointed Actuaries. This Prudential Standard does not require that actuaries other than the Appointed Actuary meet those requirements.

[7] Refer to Prudential Standard CPS 220 Risk Management.

[8] Paragraphs 6 to 8 of Attachment A to this Prudential Standard outline the requirements for producing FCRs for Level 2 groups.

[9] Paragraphs 14 to 17 of Attachment A to this Prudential Standard exempt certain general insurers from paragraphs 24 to 29 of this Prudential Standard and create different obligations in their place.

[10] Including an assessment of the impact of multiple events in a year for a general insurer as well as exposures to other accumulations as defined in Prudential Standard GPS 116 Capital Adequacy: Insurance Concentration Risk Charge.

[11] Calculated in accordance with Prudential Standard HPS 115 Capital Adequacy: Insurance Risk Charge.

[12] Note that for a general insurer, ‘insurance liabilities’ refers to the valuation undertaken in accordance with GPS 340. For private health insurers, ‘insurance liabilities’ refers to the valuation undertaken in accordance with HPS 340.

[13] The determination of exemption is a determination under section 7(1) of the Insurance Act.

[14] By whatever name called, or for a Category C insurer, the local equivalent.

[15] Note that this includes obligations under Prudential Standard LPS 230 Reinsurance, Prudential Standard LPS 600 Statutory Funds and Prudential Standard LPS 700 Friendly Society Benefit Funds, as well as the Life Act and the Life Insurance Regulations 1995.

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Insurance, Life Insurance and Health Insurance (prudential standard) determination No. 1 of 2023

Prudential Standard CPS 320 Actuarial and Related Matters

Insurance Act 1973

Life Insurance Act 1995

Private Health Insurance (Prudential Supervision) Act 2015

I, Clare Gibney, a delegate of APRA:

(c) under subsection 230A(1) of the Life Insurance Act 1995 DETERMINE the prudential standard, which applies to all life companies, including friendly societies; and

(d) under subsection 92(1) of the Private Health Insurance (Prudential Supervision) Act 2015 DETERMINE the prudential standard, which applies to all private health insurers.

This instrument commences on 1 January 2024.

Dated: 21 November 2023

Clare Gibney

Executive Director

Policy and Advice Division

Interpretation

In this Determination:

APRA means the Australian Prudential Regulation Authority.

authorised NOHC has the meaning given in section 3(1) of the Insurance Act 1973.

friendly society has the meaning given in section 16C of the Life Insurance Act 1995.

general insurer has the meaning given in section 11 of the Insurance Act 1973.

Level 2 insurance group has the meaning given in Prudential Standard GPS 001 Definitions.

life company has the meaning given in the Schedule - Dictionary to the Life Insurance Act 1995.

CPS 320 organises a small set of core concepts that structure how insurers must use actuarial expertise. These concepts are: the Appointed Actuary; the actuarial advice framework; Financial Condition Reports; Actuarial Valuation Reports; obligations to provide information and access; fitness and propriety of actuaries; APRA-directed actuarial reviews; and APRA’s discretion to adjust or exclude requirements. Each concept is defined and cross-linked to other prudential standards and to specific attachments that tailor the requirements by sector.

Appointed Actuary: The person appointed under section 39 of the Insurance Act, section 93 of the Life Insurance Act, or section 106 of the PHIPS Act, responsible for specified actuarial functions and included within the meaning of Appointed Actuary for the purposes of the Standard. Group Actuary is treated as an Appointed Actuary for Level 2 groups unless otherwise stated (para 7(c), (h); paras 11-14). The Standard makes the Appointed Actuary’s obligations functions under the Acts for specified statutory purposes (para 3).

Actuarial advice framework: A board-approved, documented framework that identifies where actuarial advice is required, specifies when the Appointed Actuary must give advice rather than another actuary, sets a materiality policy, assigns who must consider actuarial advice (including where board consideration is required), and prescribes conflict-of-interest arrangements and approaches to actuarial inputs to risk management and ICAAP reviews (paras 22-23). For each insurer type, the Attachments set minimum matters the actuarial advice framework must cover (Attachments A, B, C).

Financial Condition Report (FCR): An annual written report prepared by the Appointed Actuary that assesses the insurer’s financial condition, covering a business overview, summary of AVR results (or insurance liability valuation for private health insurers), pricing adequacy, reinsurance, investment strategy appropriateness, actual versus expected experience, risk management observations, capital adequacy and profitability outlook, equitable treatment of participating policyholders, and any other material matters (paras 24-29). FCRs for Level 2 groups have tailored rules (Attachment A paras 6-9).

Actuarial Valuation Report (AVR): For general insurers and life companies, the AVR is an annual written report by the Appointed Actuary setting out the calculated values of insurance liabilities (and for life companies the capital base and prescribed capital amount), a statement on data completeness, methodologies and assumptions, significant recent experience, and other required matters (paras 30-33). AVRs must be prepared as at the company balance date and provided to APRA within three months (para 33).

Fitness, membership and impartiality: Appointed Actuaries must meet CPS 520 fit and proper requirements and be Fellows or Accredited Members of the Actuaries Institute; actuaries undertaking prudential functions must perform impartially and expertly in accordance with Actuarial Professional Standards unless inconsistent with CPS 320 (paras 10, 17, 20).

APRA oversight and discretion: APRA can request actuarial reviews, require specific actuaries, receive reports, require separate FCRs for insurers in a group, and make adjustments or exclusions to the Standard for particular insurers or actuaries (paras 35-41). Prior APRA decisions under previous standards carry forward under paragraph 42.

Sector attachments: The Standard contains three attachments to specify minimum matters for actuarial advice frameworks and particular obligations by sector. Attachment A addresses general insurance operational specifics including class-level central estimates and probability of sufficiency targets, group-level reporting, eligibility limitations for Group Actuaries, exemptions for small or exceptional insurers, and run-off insurer treatment. Attachment B covers life company needs such as methodologies for capital base and policy liabilities, product pricing and participating business. Attachment C covers private health insurer items including FER calculation, risk margins and premium and benefit changes (Attachments A-C).

Records, timing and notifications: Working papers must be retained for seven years and produced to APRA on request (para 21). FCRs and AVRs have explicit timing and delivery requirements to the insurer and to APRA within three months of period end (paras 29, 33). If an insurer materially departs from Appointed Actuary advice in specified areas, it must notify APRA by the annual regulatory financial statements deadline or within ten business days for other advice (para 34).

These concepts together operationalise the Standard’s stated objective, namely to ensure insurers have access to impartial actuarial advice, to require that that advice reaches senior decision makers, and to provide APRA with the reports and information necessary for prudential supervision (Objectives and key requirements; paras 22-24). The Standard links to other prudential rules such as CPS 520 on fit and proper persons, GPS 340/LPS 340/HPS 340 on insurance liability valuation, GPS 001/LPS 001/HPS 001 definitions, CPS 220 on risk management, and capital adequacy standards GPS 115/116 and HPS 115 through the Attachments (paras 6, 7; Attachments).

CPS 320 applies to three cohorts of APRA-regulated institutions as defined in the Standard: general insurers (including authorised NOHCs and parent entities of Level 2 insurance groups), life companies including friendly societies and eligible foreign life insurance companies, and private health insurers (para 2). Within Level 2 insurance groups, the parent entity must ensure Group Actuary compliance and the group must comply with the Standard on a group basis unless otherwise stated (paras 11-15).

Specific persons and organisational roles affected include:

Appointed Actuaries and Group Actuaries: their functions and conduct are directly regulated, and their obligations are described as functions under the Acts for statutory purposes (paras 3, 16-17). They must be fit and proper under CPS 520 where applicable and meet Actuaries Institute membership criteria (paras 10, 20).
Boards and senior management: boards must approve actuarial advice frameworks and consider Appointed Actuary advice before framework approval; the framework must specify when actuarial advice must be presented to the board (paras 22-23). Boards must also ensure that appointed actuaries have sufficient access (para 19).
CEOs and small insurer signatories: small insurers seeking an exemption must submit documentary evidence of meeting GPS 001 small insurer criteria and an attestation from the CEO that the insurer will meet the criteria for the next 12 months; winners of exemptions must annually attestate continuing eligibility (Attachment A paras 2-4).
External and internal auditors: insurers must provide the Appointed Actuary with access to auditors and internal committees; APRA may require actuaries to provide reports to external auditors and boards (para 19; para 38).
Insurers’ compliance functions and risk management personnel: the actuarial advice framework must set out how actuarial input is sought in reviews of the risk management framework and ICAAP (para 23(e)(i-ii)), and attachments reference CPS 220 and other prudential requirements.
Outsourced or externally contracted actuaries: the Standard contemplates use of other actuaries for certain functions, including APRA-directed reviews and Group Actuary appointments that may be external; where external, contracts must include terms requiring the Group Actuary to perform mandated tasks (paras 5; Attachment A para 13).
Run-off insurers: these insurers have alternative obligations in the Standard, where the Appointed Actuary’s primary role is valuation, demonstration of asset sufficiency to a 99.5 per cent level and review of the run-off plan, which may substitute for an FCR (Attachment A paras 14-17).
APRA as the regulator: the Standard explicitly gives APRA powers to request actuarial reviews, specify the actuary to undertake them, require separate FCRs or AVRs for group members, and to adjust or exclude requirements (paras 35-41).

Who pays: the Standard places the cost of actuarial reviews requested by APRA on the insurer (para 39). Insurers will bear the costs of retaining qualified actuaries, preparing and delivering FCRs and AVRs within the prescribed deadlines, retaining documentation for seven years and meeting disclosure and access obligations to APRA and auditors (paras 21, 29, 33, 38-39).

Who decides: the insurer’s board and senior management decide governance arrangements and must approve the actuarial advice framework; APRA decides on exemptions, may require additional reporting, and may adjust or exclude requirements for particular insurers or actuaries (paras 22, 23, Attachment A paras 2-4, paras 35-41). The Appointed Actuary decides what is material for inclusion in FCRs and AVRs, exercises professional judgement about methods and assumptions, and provides recommendations and notifications to APRA if their advice is materially not accepted (paras 26-27, 31-33, 34).

The Standard establishes specific duties for insurers, Appointed Actuaries and, for Level 2 groups, Group Actuaries. It also creates rights of access and protected functions that enable actuaries to fulfil their role.

Primary duties of insurers

Appointment and enabling: An insurer must appoint an Appointed Actuary under the Acts and ensure the actuary meets eligibility and CPS 520 fit and proper criteria where applicable (paras 9-10). Insurers must do all things necessary to enable the Appointed Actuary and other actuaries to comply with prudential requirements, including informing them of applicable prudential requirements and providing necessary information (paras 9; 18(a)-(b)).
Access and cooperation: Insurers must provide the Appointed Actuary with access to committees, internal and external auditors, senior management and others as requested (para 19). Insurers must ensure working papers and documentation are retained for seven years and produced to APRA on request (para 21).
Framework and board processes: Insurers must establish and document a board-approved actuarial advice framework before the board approves it, considering advice from the Appointed Actuary (para 22). The framework must include a materiality policy and specify circumstances requiring the Appointed Actuary’s personal advice and when the board must consider advice (para 23).
Reporting delivery: Insurers must ensure the Appointed Actuary prepares the FCR annually and provides it to the insurer in time for the board to consider it for annual regulatory financial statements, and that a copy is provided to APRA within three months of the period end (paras 29 and 24). For general insurers and life companies, insurers must ensure the AVR is prepared annually as at balance date and provided to APRA within three months (paras 30, 33).
Notification of departures: Where an insurer materially departs from Appointed Actuary advice in defined areas, the insurer must notify APRA by the day its annual regulatory financial statements are due; for other advice outside FCR/AVR, the insurer must notify APRA within ten business days (para 34).

Primary duties of Appointed Actuaries

Impartiality and expertise: Actuaries performing functions under prudential requirements must act impartially and expertly with regard to Actuarial Professional Standards unless inconsistent with CPS 320 (para 17).
Reports and assessments: Prepare the FCR and AVR with specified contents and exercise judgement about materiality; include recommendations for adverse future outlooks (paras 24-33). For general insurers and life companies the AVR must state methodologies, assumptions and data completeness statements (para 31).
Group duties: For Level 2 groups the Group Actuary must undertake investigations for a group AVR annually and give advice for half-yearly reports (Attachment A paras 10-11).

Duties for third-party or other actuaries

Fit and proper and professional membership: An actuary other than the Appointed Actuary engaged to perform prudential functions must meet criteria applicable to Appointed Actuaries in paragraph 10 and perform impartially and expertly (paras 17, 37). The insurer must comply with paragraphs 18-21 in respect of that actuary, including giving access and retaining papers (para 37).

APRA rights and regulatory powers

Requesting reviews and specifying reviewer: APRA may request actuarial reviews on matters it specifies and require the insurer to commission a report containing matters APRA specifies; APRA may designate which actuary is to perform the review (paras 35-37).
Receipt and distribution of reports: Insurers must submit such review reports simultaneously to APRA and the insurer within three months of commissioning, unless APRA specifies otherwise; the insurer must also provide copies to the Appointed Actuary, external auditor, board and senior management as specified (para 38).
Adjustment and exclusion: APRA may adjust or exclude specific requirements in relation to a particular insurer, group of insurers, Appointed Actuary or other actuary subject to CPS 320 (para 41). Prior APRA exercises of discretion under previous standards continue in effect under this Standard (para 42).

Rights of the Appointed Actuary

Access to information and governance: The Standard gives the Appointed Actuary a right to access committees, internal and external auditors, senior management and the board; the actuarial advice framework must ensure the Appointed Actuary has sufficient information and access to fulfil the role (paras 19, 22).
Professional independence: Appointed Actuaries must be treated as performing impartial and expert functions; insurers are required to enable them to comply with prudential requirements (paras 16-18). Where the insurer does not accept material actuarial advice in specified areas, the Appointed Actuary’s position triggers a notification duty for the insurer to APRA (para 34).

Constraints and procedural requirements

Membership and fitness constraints: Appointed Actuaries and other actuaries must be Fellows or Accredited Members of the Actuaries Institute and meet CPS 520 fit and proper criteria as applicable (para 20).
Conflicts and conflicts management: The actuarial advice framework must set out how potential conflicts of interest or duty in the Appointed Actuary role and in the operation of the actuarial advice framework are to be managed (para 23(e)).
Eligibility limitations for Group Actuaries: A person is ineligible to be Group Actuary where they are the Group Auditor, auditor of an entity in the group, related to such auditors by employment or partnership, or a CEO or director of an entity within the group (Attachment A para 5).

In sum, CPS 320 allocates duties to insurers to enable and act on actuarial input, obliges actuaries to act impartially and expertly and creates APRA supervisory rights to request, specify and receive actuarial work and to adjust requirements where APRA deems necessary.

CPS 320 itself is a prudential standard; enforcement and penalty mechanisms are provided through the Acts under which the Standard is made, and the Standard identifies actions and supervisory tools APRA may exercise. The Standard makes actuarial obligations functions under the Acts for specified statutory purposes, which situates breaches within APRA’s broader enforcement framework (para 3). The Standard sets out monitoring and reporting mechanisms that enable APRA to supervise compliance and to require remedial work.

APRA supervisory tools under CPS 320

Direction to undertake actuarial reviews: If APRA requests an actuarial review, the insurer must arrange for it and produce the specified report; APRA may specify who must perform the review (paras 35-37). The insurer must submit the report to APRA and provide it to the Appointed Actuary, external auditor, board and senior management as required (para 38). The insurer bears the cost of the review (para 39).
Requirement to provide documentation and access: Insurers must retain working papers for seven years and provide those papers to APRA when requested in writing (para 21). The Standard requires that any actuary undertaking a review be given full access to the Appointed Actuary and to actuarial advice to be reviewed (para 40). These documentary and access requirements facilitate APRA’s investigatory and supervisory functions.
Adjustment and exclusion: APRA may adjust or exclude specific requirements of CPS 320 for particular insurers, groups or actuaries (para 41). This is a discretionary supervisory tool that allows for case-specific tailoring.
Continuity of prior determinations: APRA decisions under prior versions of the Appointed Actuary standard remain in effect as though made under the corresponding power in CPS 320, meaning past waivers, approvals or directions continue to bind the recipient (para 42).

What CPS 320 does not explicitly set out

Criminal or civil penalties: CPS 320 does not itself specify criminal penalties or a catalogue of sanctions. The Standard makes actuarial duties functions under the Acts (para 3), and the Acts contain enforcement provisions and powers that APRA can exercise when an institution fails to meet prudential requirements. The Standard therefore operates as a source of enforceable prudential obligations within the statutory enforcement framework, but the text of CPS 320 does not itemise fines, civil penalties or orders; those instruments remain in the Acts and associated prudential instruments.
Direct supervisory action list: CPS 320 does not list specific administrative sanctions such as directions, conditions, disqualification or enforcement undertakings; nevertheless the Standard’s requirements for reporting, access and review are mechanisms that feed into APRA’s broader supervisory and enforcement toolkit. APRA’s power to require reports and reviews, to receive working papers and to adjust requirements are concrete enforcement levers within this Standard (paras 35-41).

Timing and mandatory notification as enforcement levers

Reporting deadlines: The requirement to provide FCRs and AVRs to APRA within three months of the end of the period creates a compliance timetable APRA can monitor (paras 29, 33).
Departure notifications: The insurer’s duty to notify APRA if it materially departs from Appointed Actuary advice within specified timeframes places an affirmative reporting obligation on the insurer; failure to make such notification would be a compliance failure traceable by APRA (para 34).

Operational enforcement consequences

Costs of non-compliance: If APRA requires an actuarial review because of supervisory concern, the insurer bears the cost (para 39). APRA’s ability to require separate FCRs or AVRs for group members may increase compliance costs for the insurer if APRA directs additional reporting (Attachment A paras 9, 12).
Information obligations and investigations: The seven-year retention and disclosure requirement (para 21) and APRA’s right to receive review reports (para 38) create evidentiary channels that APRA can use in supervisory investigations. Failure to furnish records on request would be a breach of the Standard and, by extension, a matter for APRA to address under the Acts.

In summary, CPS 320 embeds duties and reporting obligations that are enforceable within APRA’s statutory supervision, provides APRA with rights to request work and documentation, and positions the Standard’s requirements as functions under the Acts. The Standard itself does not enumerate criminal or civil penalties; enforcement follows the statutory powers and instruments APRA has under the relevant Acts.

CPS 320 is explicitly cross-referenced to a number of other prudential standards, statutes and professional standards. The Standard adopts definitions from GPS 001, LPS 001 and HPS 001 and ties actuarial valuation requirements to GPS 340, LPS 340 and HPS 340 for insurance liability valuations (para 6; para 7(j)). It also makes Appointed Actuary obligations functions for the purposes of particular provisions in the Acts (para 3).

Key cross-links in the text

Statutory foundation: The Standard is determined under the Insurance Act 1973, Life Insurance Act 1995 and the PHIPS Act 2015 (Authority). Paragraph 3 expressly makes the obligations placed on Appointed Actuaries by CPS 320 into functions for the purposes of section 49K(1)(a) of the Insurance Act, section 97(1) of the Life Insurance Act and section 107(2) of the PHIPS Act. This cross-link means that the Standard’s requirements are attached into the statutory regulatory architecture.
Prudential definitions and other CPS/LPS/HPS standards: CPS 320 relies on GPS 001, LPS 001 and HPS 001 for defined terms and adopts those definitions where used (para 6(a)). The Standard also links to other prudential standards on liability valuation: GPS 340 for general insurers, LPS 340 for life companies and HPS 340 for private health insurers when referring to insurance liabilities (para 7(j); note to para 34). The actuarial advice framework must address ICAAP and the insurer’s risk management framework and cross-references CPS 220 Risk Management (para 23(f)(i-ii); footnote).
Fit and proper regime: CPS 320 requires Appointed Actuaries to meet eligibility and fit and proper requirements in accordance with CPS 520 and the insurer’s fit and proper policy (para 10). Paragraph 20 confirms that the insurer must ensure actuaries performing functions under prudential requirements are assessed as fit and proper in accordance with CPS 520 and be a Fellow or Accredited Member of the Actuaries Institute. The Standard therefore integrates into APRA’s broader fit and proper person regime.
Capital and capital charge standards: Attachment A requires specific actuarial work to support capital charge calculations in GPS 115 and GPS 116 (Attachment A para 1(a)-(f)). Attachment C requires private health insurers’ actuarial frameworks to include FER calculation and other matters linked to HPS 115 (Attachment C paras 1(c) and (n)). Attachment B links actuarial advice to capital base and prescribed capital amount calculations under life company prudential standards and related Life Act requirements (Attachment B para 1(a); footnote).
Professional standards: Actuarial duties are to be performed with regard to Actuarial Professional Standards “to the extent that they are not inconsistent with the requirements of this Prudential Standard” (para 17; footnote). The Standard therefore takes precedence where there is inconsistency.
Prior determinations and continuity: Paragraph 42 expressly provides that exercises of APRA discretion (approvals, waivers, directions) under previous versions of the Appointed Actuary standard continue as if exercised under corresponding APRA powers in CPS 320. This preserves transition continuity.

Practical interaction implications

Where CPS 320 requires valuations of insurance liabilities, it references and prescribes the valuation methodology to be consistent with GPS/LPS/HPS 340 standards, thereby requiring alignment of actuarial methodologies to those prudential valuation standards (para 30; para 7(j)).
The fit and proper overlay requires insurers to align internal fit and proper policies and CPS 520 processes for appointment and assessment of Appointed Actuaries (paras 10, 20). Employers must therefore align human resources, compliance and recruitment functions with the prudential fit and proper requirements.
For Level 2 groups, the Standard requires group-level AVRs and FCRs and cross-jurisdictional accounting considerations (Attachment A paras 6, 10-12). Where overseas business accounting figures are used, the Group Actuary must comment on their suitability relative to the Standard (Attachment A para 12(a)). For EFLICs, FCRs and AVRs must consider overseas operations when prepared for Australian business (paras 28, 28(b)).
Conflicts and auditors: Group Actuary eligibility rules create a separation between the actuarial role and audit function to reduce conflicts of interest (Attachment A para 5). The Standard requires access to external auditors and that external audit bodies be included in distribution of APRA-requested review reports (para 38), interacting with auditing obligations under financial reporting and prudential reporting regimes.

In short, CPS 320 is nested within APRA’s prudential regime and deliberately cross-references liability valuation standards, fit and proper, risk management, capital and actuarial professional standards, creating a set of integrated obligations across prudential and corporate governance regimes.

The instrument’s preamble records that it revokes Insurance, Life Insurance and Health Insurance (prudential standard) determination No. 1 of 2018, including Prudential Standard CPS 320 Actuarial and Related Matters made under that determination. The instrument itself is dated 21 November 2023 and commences on 1 January 2024 (preamble; para 4). Paragraph 42 preserves the continuing effect of any prior APRA exercise of discretion under earlier Appointed Actuary standards such as GPS 320, LPS 320 and HPS 320, or earlier versions of CPS 320, by providing that those exercises of discretion continue to have effect as though exercised under corresponding powers in CPS 320.

The Standard does not include an historical table listing prior amendments or prior instrument dates beyond the revocation of the 2018 determination and the carry-forward of prior APRA determinations under paragraph 42. The attachments reflect an update to sector-specific matters for general insurance, life insurance and private health insurers, but the Standard itself contains no schedule of earlier textual amendments within this document.

What is explicit

Revocation: The 2018 instrument is expressly revoked in the instrument preamble. That revocation includes the earlier CPS 320 insofar as it was part of that 2018 determination (preamble).
Transitional continuity for prior APRA decisions: Paragraph 42 ensures previous APRA discretions, approvals, waivers or directions under the former Appointed Actuary standards continue to operate, effectively porting existing supervisory arrangements for affected insurers into the new Standard without immediate reapplication (para 42).

What is not in the document

No amendment timeline or versioning history beyond 2018 is provided in the text. The Standard does not set out a list of amendments, consultations or public comment periods that preceded the instrument in the document itself. Any earlier historical changes to the Appointed Actuary regime prior to 2018 are not described.
The Standard does not specify a sunset or staged implementation timetable beyond the commencement date of 1 January 2024 (para 4). It does not provide transitional relief or specific transition periods within the body of the Standard aside from the continuation of prior APRA determinations under paragraph 42.

Practical consequence for practitioners

Institutions which had waivers, approvals or other discretions under previous Standards should not assume those instruments have lapsed; paragraph 42 preserves their effect. However arrangements that relied on prior regulatory expectations should be checked against the full CPS 320 text to confirm that operational practices remain compliant with the Standard’s updated duties, reporting formats and attachments.
The lack of an explicit staged implementation timetable beyond the commencement date means insurers must plan for compliance effective 1 January 2024, including fitting actuarial functions, documentation, systems and reporting schedules to the Standard’s deadlines and content requirements.

CPS 320 as provided here contains no references to litigation, court decisions or published disputes invoking the Standard. The text does not name or describe any cases, judicial interpretations, or administrative appeals relating to the Appointed Actuary regime. Paragraph 42 preserves prior APRA exercises of discretion, but it does not identify any legal challenges or litigation outcomes associated with those past decisions. There are no citations within the document to judicial or tribunal determinations.

For practitioners seeking precedential or interpretative guidance

The Standard itself should be treated as the primary source of actuarial prudential obligations; any litigation or case law interpreting the Standard would need to be sought outside this instrument. The Standard cross-references statutory provisions in the Insurance Act, Life Insurance Act and PHIPS Act and other prudential standards; litigation interpreting any of those texts may be relevant in practice, but none is included or mentioned in this Standard.
APRA’s exercise of discretion under paragraph 41 and its history of exercising discretion under earlier versions of the Appointed Actuary standard (para 42) may have generated administrative decisions or appeals, however the Standard does not identify or summarise such matters.
Given the Standard transforms actuarial duties into functions under specified statutory provisions (para 3), disputes about compliance and enforcement would be resolved in accordance with the statutory enforcement regime of the relevant Act rather than solely within the administrative text of CPS 320.

Practitioners should therefore treat the absence of litigation references as informational rather than dispositive. If a client requires precedent or decisions interpreting CPS 320 or prior Appointed Actuary standards, separate searches of administrative decisions and court records, and consultation of APRA’s published regulatory guidance and determinations, will be required.

CPS 320 includes a number of concrete operational traps and timing rules that can catch practitioners and firms that assume more flexible compliance.

Timing and delivery deadlines

Three-month delivery requirement for FCR and AVR: The Appointed Actuary must prepare the FCR annually and the insurer must provide the FCR to APRA within three months of the end of the period to which the report relates; similarly, the AVR for general insurers and life companies must be prepared annually as at the company balance date and provided to APRA within three months of the end of the period (paras 29, 33). These fixed deadlines are tied to the insurer’s annual regulatory financial statements timetable and can be operationally demanding.
Notification timing on departures from advice: If an insurer does not accept the Appointed Actuary’s advice in a material respect on certain matters (insurance liabilities valuation, concentration risk charge, capital base or prescribed capital amount, or FER), the insurer must notify APRA on or before the day the insurer’s annual regulatory financial statements are required to be submitted to APRA; advice outside FCR/AVR requires notification within ten business days (para 34). The ten-business-day rule is short and requires clear internal escalation processes.

Recordkeeping and disclosure obligations

Seven-year retention and disclosure: Working papers and documentation of the Appointed Actuary and of actuaries conducting APRA-requested reviews must be retained for seven years, and must be provided to APRA when requested in writing (para 21). Practitioners should not rely on shorter document retention policies. The Standard also requires that the custodian of working papers provide them to APRA if requested.

Fit and membership requirements

CPS 520 overlay and Actuaries Institute membership: Appointed Actuaries must be fit and proper under CPS 520 where applicable and actuaries must be Fellows or Accredited Members of the Actuaries Institute (paras 10, 20). Insurers must ensure compliance with CPS 520 processes; failure to scope CPS 520 implications into recruitment and appointment practices can create non-compliance.

Group and conflict constraints

Group Actuary ineligibility rules: A person is ineligible to be appointed Group Actuary if they are the Group Auditor, an auditor of an entity in the group, a partner or employee in those audit relationships, or a CEO or director of any entity within the Level 2 insurance group (Attachment A para 5). This introduces separation requirements that can constrain internal appointments.
Outsourcing and contract terms: Where the Group Actuary is external, Attachment A requires contract terms obliging the Group Actuary to perform specified tasks and comply with requirements (Attachment A para 13). Failure to include such terms may leave the parent entity unable to compel compliance with Standard duties.

Exemptions and attestations

Small insurer exemption requires CEO attestation: Small insurers seeking an exemption under Attachment A must provide documentary evidence of small insurer status under GPS 001 and an attestation from the CEO that the insurer will meet the criteria for the next 12 months; holders of exemptions must provide an annual CEO attestation confirming continuing eligibility (Attachment A paras 2-4). This is an ongoing compliance requirement and not a one-off relief.

APRA discretion and targeted reporting

APRA may require separate FCRs or AVRs for group members: Even where a single group FCR is prepared, APRA may require separate FCRs for one or more insurers within a group or a different group within a corporate group by a time specified by APRA (Attachment A paras 7-9). Insurers must be prepared to produce additional reports on APRA’s direction.

Run-off insurers special regime

Alternative obligations: Run-off insurers may substitute an Appointed Actuary review of the run-off plan for preparation of an FCR, but APRA may require an FCR if it considers a run-off plan inadequate (Attachment A paras 14-17). Run-off insurers must ensure run-off plans and actuarial reviews meet the Standard’s expectations, including demonstration of tangible assets being sufficient at a 99.5 per cent level of sufficiency (Attachment A para 14(b)).

APRA-requested reviews and cost

Insurer bears the cost: If APRA requests a review under paragraph 35, the insurer must bear the cost (para 39). APRA-specified reviews can therefore be costly short-notice demands.

Materiality judgement and documentation

Appointed Actuary’s materiality judgement: The Appointed Actuary must exercise judgement about what is relevant and material to include in the FCR and AVR; if they exclude prescribed matters they must state briefly why (paras 26, 32). This creates an evidentiary trail and potential points of supervisory disagreement between APRA and the Appointed Actuary.

Practical consequences

Small and new entrants: Small insurers may still be subject to Appointed Actuary obligations if APRA declines an exemption, and the exemption process itself requires ongoing attestations. Firms should not assume a de facto exemption without APRA determination (Attachment A paras 2-4).
Coordination across functions: The Standard requires an actuarial advice framework that coordinates board consideration, risk management and ICAAP processes and sets materiality thresholds. Firms lacking integrated governance processes will need to invest in alignment across actuarial, risk, finance and board functions (para 23).

These “gotchas” are concrete compliance traps that arise directly from timeframes, documentation, eligibility criteria and APRA’s discretionary powers as set out in the Standard.

Complying with CPS 320 requires a combination of governance, documentation, appointment processes, systems for data and record retention, and operational practices that embed actuarial reporting into an insurer’s regulated reporting cycle. Below are practical, source-grounded steps mapped to the Standard’s requirements.

Confirm coverage and appointment obligations

Identify whether the entity is in scope under para 2. Ensure an Appointed Actuary is appointed under the relevant statutory provision (paras 9, 3). For Level 2 insurance groups, appoint a Group Actuary and ensure the parent entity accepts responsibility for ensuring compliance (paras 11-14).
If a small insurer seeks exemption, prepare an application under Attachment A including documentary evidence of small insurer status under GPS 001 and a CEO attestation as required; maintain the annual attestation if the exemption is granted (Attachment A paras 2-4).

Meet eligibility and fit and proper processes

Ensure the proposed Appointed Actuary or Group Actuary satisfies the eligibility criteria and CPS 520 fit and proper requirements (paras 10, 20). Maintain fit and proper documentation in accordance with CPS 520 and the insurer’s own fit and proper policy.
Confirm actuary professional membership: Appointed Actuaries and other actuaries performing prudential functions must be Fellows or Accredited Members of the Actuaries Institute (para 20).

Draft and obtain board approval of the actuarial advice framework

Prepare a board-approved, documented actuarial advice framework that includes a materiality policy, identifies areas requiring actuarial advice as per the relevant Attachment, specifies when Appointed Actuary advice must be provided, identifies who must consider that advice (including when the board must consider it), sets out conflict-of-interest management and addresses actuarial input to risk management and ICAAP reviews (paras 22-23; Attachments A-C).
Before approving the framework, secure a written Appointed Actuary advice to the board on the framework as required by para 22.

Operationalise access and information flows

Implement processes to ensure the Appointed Actuary receives all material information and access needed to fulfil their role, including access to committees, internal auditors, external auditors, senior management and the board (paras 18-19).
Define information delivery timetables aligned to FCR and AVR preparation and to the insurer’s financial reporting calendar so the board has reasonable opportunity to consider the FCR ahead of annual regulatory financial statements (para 29).

Prepare FCRs and AVRs on schedule and with required content

For insurers, ensure the Appointed Actuary prepares the FCR annually addressing the specific matters listed in paragraph 25, exercising materiality judgement and documenting reasons for any excluded prescribed matters (paras 24-26). Ensure the FCR includes recommendations where outlooks are adverse (para 27).
For general insurers and life companies, ensure the Appointed Actuary prepares an annual AVR as at the company balance date including values, data completeness statements, methodologies and assumptions, and commentary on recent experience (paras 30-33).
For private health insurers follow Attachment C content requirements for FCR and valuation elements, including FER calculation (Attachment C paras 1-4).
Deliver FCR and AVR copies to APRA within three months of the end of the relevant period and ensure timely internal distribution to the board and auditors (paras 29, 33; para 38).

Maintain records and provide for disclosure

Set and operate a record retention policy that retains working papers and documentation of actuarial work for seven years, and that can produce those materials to APRA on written request (para 21).
Ensure custody and chain-of-evidence processes are in place so the holder of working papers can provide them to APRA as required (para 21).

Implement conflict management and independence safeguards

Include conflict-of-interest management processes in the actuarial advice framework (para 23(e)). For Level 2 groups, ensure the Group Actuary appointment complies with the ineligibility rules (Attachment A para 5). If engaging external Group Actuaries, include contractual clauses requiring compliance with the Standard’s tasks and requirements (Attachment A para 13).

Be ready for APRA-requested reviews

Have a documented process for commissioning actuarial reviews if APRA requests them, including selecting the actuary (Appointed Actuary or another actuary) as APRA may specify, and prepare to submit such reports to APRA, the Appointed Actuary, external auditors, the board and senior management within the timeline APRA sets (paras 35-38). Budget for the insurer-borne cost of such reviews (para 39).

Establish internal escalation for departures from actuarial advice

Implement internal procedures that detect material departures from Appointed Actuary advice and trigger notifications to APRA within prescribed timeframes: by the annual regulatory financial statements deadline for certain material matters, and within ten business days for other advice provided outside FCR/AVR (para 34).

Align with related prudential standards and statutes

Map CPS 320 requirements to GPS 340/LPS 340/HPS 340 valuations, CPS 520 fit and proper processes, CPS 220 risk management inputs, and GPS/LPS/HPS capital standards that interact with actuarial work, and update policies and controls accordingly (paras 6-7, 23; Attachments). Ensure actuarial methodologies are consistent with the prescribed valuation standards where the Standard requires it (para 30; para 7(j)).

Monitor and manage transition and continuity instruments

Review any previous APRA determinations, waivers or approvals under earlier Appointed Actuary standards to confirm their continuing effect under paragraph 42, and update internal compliance records to reflect any carry-forward conditions (para 42).

Governance and audit trail

Ensure the board receives Appointed Actuary advice before approving the actuarial advice framework and is furnished with FCRs and AVRs in time to consider them in regulatory financial statements preparation (paras 22, 29). Maintain audit trails for Appointed Actuary decisions, methodologies, assumptions and materiality judgements so APRA-requested reviews can be executed efficiently (paras 26, 31).

These practical steps map directly to the textual requirements in CPS 320 and create a compliance blueprint: appoint and qualify the actuary, document the framework and materiality policy, integrate actuarial outputs into governance and reporting cycles, retain and make available records for seven years, and ensure readiness for APRA-directed reviews and notifications.

Deep Dive

What it does

Current sections

Insurance, Life Insurance and Health Insurance (prudential standard) determination No. 1 of 2023

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Authority

Application

Interpretation

Appointment

Group Actuaries

Obligations of the Appointed Actuary and other actuaries subject to prudential requirements

Insurers’ obligations with respect to actuaries

Actuarial advice framework

Financial Condition Report

Actuarial Valuation Report

Departures from actuarial advice

Actuarial reviews required by APRA

Adjustments and exclusions

Determinations made under previous prudential standards

Attachment A – General insurance matters

Actuarial advice framework of general insurers

Exemptions from appointing an Appointed Actuary

Appointment of a Group Actuary

FCRs for Level 2 insurance groups

AVRs for Level 2 insurance groups

Run-off insurers

Attachment B – Life insurance matters

Actuarial advice framework of life companies

Attachment C – Private health insurance matters

Actuarial advice framework of private health insurers

Source text: opening excerpt

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Main concepts

Who it affects

Key duties and rights

Penalties and enforcement

How it interacts with other laws

Amendment history

Litigation history

Gotchas

How to comply

Authority

Application

Interpretation

Appointment

Group Actuaries

Obligations of the Appointed Actuary and other actuaries subject to prudential requirements

Insurers’ obligations with respect to actuaries

Actuarial advice framework