NobleOak examined by APRA after prudential breaches

3 April 2023

The Australian Prudential Regulation Authority (APRA) says it is reviewing NobleOak Life’s compliance processes after the insurer breached prudential standards in relation to capital requirements.

APRA has already notified NobleOak over its failure to comply with Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge (LPS 117) and Reporting Standard LRS 117.0 Asset Concentration Risk Charge (LRS 117.0).

“The breaches relate to the measurement and reporting of NobleOak’s reinsurance exposures and the associated asset concentration risk, which have resulted in a breach of capital requirements,” APRA said in a statement.

The prudential regulator says the listed insurer has outlined its plan for remediating the breach of LPS 117 requirements by July 1. The insurer has also launched a review of its control processes for complying with APRA’s prudential standards.

“APRA is satisfied the plan is credible and will monitor NobleOak’s execution of the plan closely over the coming months,” the regulator said.

“APRA will examine NobleOak’s processes for compliance with its prudential and reporting obligations in the context of its broader risk governance framework to establish the underlying causes of the breaches.”

The regulator says the non-compliance poses no immediate risk to members and policyholders and is not connected to any recent financial market movements or developments.

APRA has not ruled out taking action as needed to hold those responsible for the breach to account.

NobleOak says in an investor update the business is reviewing its control environment and accountabilities and will remedy any deficiencies identified.

The insurer says its method for calculating and reporting reinsurance asset exposure is “consistent” with advice received from its independent appointed actuary from KPMG.

It also says its financial statements have also been subject to external audit by Deloitte Australia.

NobleOak also says it has disclosed in its half-year financial report in February of actions that were already underway to manage the way the business operates its reinsurance arrangements.

“APRA considers these actions constitute a credible plan,” the insurer said.

“NobleOak believes the combined impact of these actions will effectively mitigate the issues raised by APRA and satisfy its regulatory reporting obligations by June 30 2023.”