International regulatory alignment through the lens of recovery planning

Why does international regulatory alignment matter for insurers?

Global alignment and consistency are vital in the insurance world. This is because insurance groups, capital markets, reinsurance arrangements and policyholder risks often operate across national borders. Reasonable alignment in insurance regulation aims to ensure policyholders receive adequate levels of protection across various jurisdictions and insurance market players do not face materially different solvency and other expectations to result in potential regulatory arbitrage and thereby improves market discipline. Such alignment also benefits insurers, particularly for large insurance groups with overseas operations to manage group-wide risks and reduce compliance costs.

APRA and IAIS

The Australian Prudential Regulation Authority (APRA) is an active member of the International Association of Insurance Supervisors (IAIS), which develops principles, standards and guidance for supervision in the insurance sector globally. Whilst IAIS publications are not legally enforceable in its member jurisdictions, regulators such as APRA may often leverage such international frameworks in developing, implementing and enhancing its own regulatory requirements in Australia. APRA also contributes to IAIS through participation in consultations and working groups, APRA Board representative(s) serving on the IAIS Executive Committee and chairing the Audit and Risk Committee.

As such, there is significant value in dissecting IAIS publications, as these may provide an indication as to areas of regulatory focus by APRA with respect to the insurance sector over the near future.

ICPs, ComFrame and ICS

The Insurance Core Principles (‘ICPs’) and Common Framework for the Supervision of Internationally Active Insurance Groups (‘ComFrame’) are the two cornerstone supervisory frameworks developed by IAIS. These are intended to be applicable across all insurance markets.

For instance, APRA’s CPS 190 Recovery and Exit Planning (CPS 190) standard reflects ICP 16.15, which is a sub-principle under Enterprise Risk Management for Solvency Purposes. In addition, ComFrame 16.15 provides additional expectations for larger insurance groups with material cross-border operations around recovery planning, group-wide governance, ongoing maintenance and supervisory reviews.

What did the IAIS change in its recovery planning guidance?

In July 2026, the IAIS published an updated Application Paper on Recovery Planning which aims to provide guidance on recovery planning in the ICPs and ComFrame. It amends the original Application Paper dated November 2019 in light of revised ICP and ComFrame standards adopted in December 2024, and reflects evolving practices across 24 member jurisdictions, including Australia.

Key messaging from IAIS in the Application Paper, which reflects consultation from multiple member bodies, include:

• Propose leveraging existing frameworks, e.g. Enterprise Risk Management (ERM) and Own Risk and Solvency Assessment (ORSA), for recovery planning to minimise duplication and streamline processes.
• Highlighting the significance of operational preparedness and ensuring recovery plans are practical and usable in crises, rather than lengthy, formalistic documents.
• Encouraging the adoption of simplified recovery plans and phased implementation for smaller, less complex insurers to reduce unnecessary burden.

In respect of the second item, IAIS highlights the importance of a high-level abstract for the main operational components of the recovery plan, which summarises the most significant trigger points, key recovery strategies and operational plan for implementation. According to IAIS, the purpose of the abstract is to enable the Board and Senior Management to quickly understand and assess the recovery framework in responding to severe stress situations. As such, tables and flow charts are recommended.  

This aligns with paragraph 19(a) of CPS 190, which requires Recovery and Exit Plans to include a “concise summary that provides a standalone guide to use” the plan. IAIS highlights in the Application Paper that the purpose of the abstract is to serve as a roadmap to help the Board and Senior Management in effectively responding to severe stress situations. It gives the example of using tables and flow charts to summarise such details, which implies clarity and simplicity of presentation. Paragraph 19(a) of CPS 190 has been broadly worded to enable creative autonomy, such that practices may range from multiple pages of discussion to a single table of guidance. Whilst all these satisfy the APRA requirement, they may differ in practical usability in times of crisis. As insurers enter their third year of implementing the Recovery and Exit Plans (CPS 190 effective 1 January 2024), there may be benefit in assessing the practical efficiency of the Recovery and Exit Plan, including the summary guide.

In addition, IAIS also encourages the Recovery and Exit Plans to include a description of how the recovery plan is integrated into the overall ERM of the insurer. Through the Application Paper, IAIS notes the importance of understanding the relationship between recovery planning and other ERM tools, such as the ORSA, contingency plans and capital and liquidity risk management plans. In this regard, IAIS highlights that insurers should treat the recovery plan and other ERM tools as mutually reinforcing analyses and ensure that they remain in alignment.

Paragraph 15 of CPS 190 requires the integration of the Recovery and Exit into existing risk, capital, liquidity and business frameworks. This is further emphasised in CPG 190  as to  the importance of linkages between the Recovery and Exit Plan and the Internal Capital Adequacy Assessment Process (ICAAP), contingency funding plans, stress tests and risk appetite. It is particularly important to note that recovery and exit planning does not operate in a vacuum. There will be inevitable overlaps with the ICAAP where BAU, stress and recovery triggers are designed along the capital continuum. Moreover, most insurers would have existing contingency and/or crisis management plans in place prior to the introduction of CPS 190 on 1 January 2024. As such, the Recovery and Exit Plan artefact would naturally leverage such frameworks in its design, and therefrom operate alongside one another. It is important for insurers to recognise this embedment, and as suggested by IAIS, there is benefit in explicitly drawing out how these related frameworks interact to minimise the duplication of stakeholder effort and responsibilities and streamline the process for more effective recovery in a crisis.

What should insurers expect from APRA after the IAIS update?

Another key area of enhancement between the 2019 and 2026 versions of the IAIS Application Paper is governance and supervision through an operational lens. For instance, the latest paper explicitly draws out that supervisors may require insurers to provide adequacy assurance of the recovery plan, requiring independent validation from internal audit or third-party consultancies. It further adds that supervisors should assess the reasonableness of trigger frameworks and challenge insurers if there is inadequate governance around recovery plan development, approval and monitoring. These are but examples of IAIS’s greater focus on operational readiness and early intervention capability in recovery planning.

Notwithstanding these amendments, it ought to be recognised that APRA’s CPS 190 framework is still generally more prescriptive than IAIS’s Application Paper. This means that insurers who are currently following APRA guidance and complying with CPS 190 should not expect significant change. That said, IAIS’s latest Application Paper provides a useful indication of common areas of interest for the global insurance industry in the context of recovery planning. It follows that APRA may increase its focus on similar themes in FY27, especially as many insurers are due for their first independent triennial review of the Recovery and Exit Plan.