The outsourcing agreementThe outsourcing agreement

The outsourcing agreement

18. Except where otherwise provided, all outsourcing arrangements must be evidenced by a written, legally binding agreement. The agreement must be executed before the outsourcing arrangement commences.

19. At a minimum, the agreement (including arrangements with related bodies corporate) must address the following matters:

(a) the scope of the arrangement and services to be supplied;

(b) commencement and end dates;

(c) review provisions;

(d) pricing and fee structure;

(e) service levels and performance requirements;

(f) audit and monitoring procedures;

(g) business continuity management;

(h) confidentiality, privacy and security of information;

(i) default arrangements and termination provisions;

(j) dispute resolution arrangements;

(k) liability and indemnity;

(l) subcontracting;

(m) insurance; and

(n) to the extent applicable, offshoring arrangements (including through subcontracting).

20. A life company that outsources a material business activity must ensure that its outsourcing agreement includes an indemnity to the effect that any subcontracting by a third party service provider of the outsourced function will be the responsibility of the third party service provider including liability for any failure on the part of the subcontractor.

21. The requirements in paragraph 18 do not apply to an outsourcing arrangement with a related body corporate unless

(a) after having consulted with the life company, APRA notifies the life company in writing that the outsourcing arrangement must be evidenced by a written legally binding agreement; or

(b) another prudential standard requires the arrangement to be undertaken using a written legally binding agreement.

22. Where a life company enters into an outsourcing agreement as a result of an unexpected extreme event which results in:

(a) the life company invoking its Business Continuity Plan; or

(b) the sudden financial or operational failure of an existing service provider,

then paragraphs 16 to 21 inclusive, 26 and 27 need only be complied with to the extent that is reasonably possible having regard to the nature of the extreme event. The life company must notify APRA as soon as practicable of any such outsourcing arrangement.

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