APRA seeks insurer executive package disclosure feedback

11 July 2022

The Australian Prudential Regulation Authority (APRA) has opened consultation on new remuneration disclosure and reporting requirements it wants to introduce for insurers.

APRA says the change would improve transparency and allow more consistent comparisons across the entities it regulates. It would also apply to banks and super funds.

“Investors and the community can see how key executives are rewarded, and that consequences are applied where there are poor risk outcomes,” Deputy Chairman John Lonsdale said.

Last year, APRA finalised Prudential Standard CPS 511 Remuneration (CPS 511) – intended to increase the accountability of boards for remuneration decisions. It says the proposed disclosure and reporting requirements would reinforce that approach.

Insurers would be required to publicly disclose how their remuneration arrangements are designed, and how risk is factored into remuneration outcomes for key executives, making clear how executives are rewarded and incentivised, and the consequences where risk is managed poorly.

Large and complex financial institutions would be required to disclose how they have placed a material weight on non-financial metrics such as risk management and conduct, and remuneration outcomes for the CEO as well as other key executives and “material risk-takers”.

APRA will publish centralised statistics for comparison of remuneration outcomes.

Insurance companies do not currently have prudential remuneration disclosure requirements set by APRA, though regulated entities that are listed in Australia have disclosure requirements for certain executive and director remuneration under the Corporations Act.

The proposed disclosure and reporting requirements will take effect after the implementation of CPS 511 next year for large entities, and the following year for smaller entities.