Audit arrangementsAudit arrangements

Audit arrangements

33. The life company’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 life company’s outsourcing policy. Where APRA has exempted a life company from having a dedicated internal audit function, or approved alternative arrangements under Prudential Standard LPS 510 Governance, APRA may also vary the requirements of this paragraph.

34. APRA may request the external auditor of the life company, 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 life company and must be made available to APRA.

Transition arrangements

Application for transitional relief

35. Upon application by a life company, APRA may grant transitional relief by exempting a life company from the operation of any of the provisions of this Prudential Standard or by varying their operation in relation to a life company. APRA will only do so if it is satisfied that the life company 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.

36. When assessing requests for transitional relief the criteria that APRA will consider will include assessment of whether the life company:

(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 life company have prevented it from being able to comply by the effective date.

Existing outsourcing agreements

37. A life company 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.

38. 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.