Insurance (prudential standard) determination No. 9 of 2006 - Prudential Standard GPS 231 - Outsourcing
Audit arrangementsAudit arrangements
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Audit arrangements
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The insurer’s internal audit function must review any proposed outsourcing of a material business activity and regularly review and report to the Board or Board Audit Committee on compliance with the insurer’s outsourcing policy. Where APRA has exempted an insurer from having a dedicated internal audit function, or approved alternative arrangements under Prudential Standard GPS 510 Governance, APRA may also vary the requirements of this paragraph.
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APRA may request the external auditor of the insurer, or an appropriate external expert, to provide an assessment of the risk management processes in place with respect to an arrangement to outsource a material business activity. This could cover areas such as IT systems, data security, internal control frameworks and business continuity plans. Such reports will be paid for by the insurer and must be made available to APRA.
Transition arrangements
Application for transitional relief
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Upon application by an insurer, APRA may grant transitional relief by exempting an insurer from the operation of any of the provisions of this Prudential Standard or by varying their operation in relation to an insurer. APRA will only do so if it is satisfied that the insurer will not able to comply with the provisions of this Prudential Standard by the effective date and that, in APRA’s view, the Board and senior management have made all reasonable attempts to comply with this Prudential Standard.
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When assessing requests for transitional relief the criteria that APRA will consider will include assessment of whether the insurer:
(a) has submitted the application to APRA at least 20 business days before the effective date; and
(b) can demonstrate that it is, and has been, taking reasonable actions to enable it to comply with this Prudential Standard and that events beyond the direct control of the insurer have prevented it from being able to comply by the effective date.
Existing outsourcing agreements
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An insurer must notify APRA of all existing outsourcing agreements involving material business activities both within and outside Australia within 20 business days of the effective date.
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This Prudential Standard does not apply to an outsourcing agreement entered into prior to the effective date until the next scheduled review date of the outsourcing agreement provided the Board is satisfied that the existing outsourcing agreement is generally compliant with the requirements of this Prudential Standard.
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Where the Board is not satisfied that an existing outsourcing agreement is generally compliant with the requirements of this Prudential Standard, the insurer will have until 31 December 2007 to comply, unless granted transitional relief by APRA under paragraph 35.