Insurance - PricewaterhouseCoopers

Risk management
GPS 220 Risk Management aims to ensure that a general insurer has systems for
identifying, assessing, mitigating and monitoring the risks that may affect its ability to
meet its obligations to policyholders. These systems – together with the structures,
processes, policies and roles supporting them – are referred to as a general insurer’s
risk management framework.
The prudential standard requires that a general insurer:
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includes a documented Risk Management Strategy (RMS) in its risk management
framework;
has sound risk management policies and procedures and clearly defined
managerial responsibilities and controls;
submits its RMS to APRA when any material changes are made;
has a dedicated risk management function (or role) responsible for assisting in
the development and maintenance of the risk management framework;
submits a three-year rolling Business Plan to APRA and re-submits after each
annual review or when any material changes are made;
submits a Risk Management Declaration (RMD) to APRA on an annual basis; and
submits a Financial Information Declaration (FID) to APRA on an annual basis.
Risk management framework
The risk management framework of a general insurer should consider, at a minimum,
the following risks:
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Balance sheet and market risk;
Credit risk;
Operational risk;
Insurance risk;
Reinsurance risk;
Concentration risk; and
Risks arising from the business plan.
The framework should also cover other elements such as the interaction between
the risk management role and the board; the processes used to identify, monitor
and mitigate risks; and the mechanisms for monitoring the minimum capital
requirements (MCR).
The general insurer is also required to have this risk management framework
reviewed by operationally independent, appropriately trained and competent
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