Objective and key requirements of this PObjective and key requirements of this Prudential Standard

Objective and key requirements of this Prudential Standard

This Prudential Standard aims to ensure that all outsourcing arrangements involving material business activities entered into by a general insurer are subject to appropriate due diligence, approval and on-going monitoring. All risks arising from outsourcing material business activities must be appropriately managed to ensure that the general insurer is able to meet both its financial and service obligations to its policyholders.

The key requirements of this Prudential Standard include that a general insurer must:

• have a policy relating to outsourcing of material business activities;
• have sufficient monitoring processes in place to manage the outsourcing of material business activities;
• for all outsourcing of material business activities with third parties, have a legally binding agreement in place, unless otherwise agreed by APRA;
• consult with APRA prior to entering into agreements to outsource material business activities to service providers who conduct their activities outside Australia; and
• notify APRA after entering into agreements to outsource material business activities.