APRA today announced that the start date for their revised outsouring approach (discussed here) would be pushed back from 1 January 2007 to 1 April 2007. For details, see here (banks), here (general insurance) or here (life assurance).
Why is this? APRA do not seem to say, but my best guess is that the insurers are not ready and were not going to be in a position to state that their existing outsourcing arrangements were in “general compliance” with the new standards. For the banks, this is unlikely, given the paucity of the changes, but, as the application to the insurers is new, this was always going to be a big step.
If anyone would like to let me know otherwise, please do.
2 comments
2 December, 2006 at 11:33
Jennifer
I saw some comment from the ICA when they were gathering opinion on whether to ask for the delay. I think, to be fair, it’s also because the final standards were released relatively recently. Even if you are broadly compliant with a standard like this, there is always a compliance cost from ticking all the boxes in a new standard. You generally need to report what you’re currently doing, check it formally against the standard, get the Board to approve a report, that kind of thing.
4 December, 2006 at 13:28
ozrisk
Jennifer,
I would partially agree. The existing agreements would not need to be touched until the next roll date unless not generally compliant. For the banks, one that was compliant under the old one should be counted as generally compliant under the new one. An insurance firm, though, would be in new territory. I would expect that the insurance firm would have used APS231 as a guideline anyway when drawing up any agreement but, as you say a box ticking exercise would be needed and this would take time (and involve some expensive, time poor, lawyers) and may even need contract re-negotiation.
The delay, then, makes sense. Interestingly, I had a meeting with APRA a few days ago and I asked about this. The body language from the APRA people there was telling – a few nervous looks and some uncomfortable seat shuffling followed, with the response being that several factors were involved. Someone in the organisation obviously got a bit upset about this.