Capital Treatment of Longevity Products for Retirement Income

APRA News & Publications

Published March 31st, 2026

Detected March 30th, 2026

Summary

APRA has finalized amendments to prudential standards introducing an advanced illiquidity premium option for insurers calculating capital requirements for longevity products, including annuities. The reforms include additional risk controls on governance, reporting, and asset composition to support the AILP approach. These changes take effect on 1 July 2026.

View original document View source feed page

What changed

APRA has finalized amendments to prudential standards on capital treatment of longevity products, introducing an optional Advanced Illiquidity Premium (AILP) methodology for calculating capital requirements. This approach better reflects the long-term nature of longevity liabilities and reduces procyclicality in capital settings. Supporting the AILP option, APRA has introduced additional risk controls covering portfolio governance, reporting, and asset composition requirements. The reforms follow two rounds of industry consultation with strong stakeholder support.

Insurers choosing to use the AILP methodology must submit feedback on the APRA reporting template by 12 May 2026. All reforms become effective on 1 July 2026. Insurers should review their capital frameworks for longevity products and prepare implementation plans, including assessment of whether the AILP option is appropriate for their portfolios given the enhanced governance and reporting requirements.

What to do next

Review capital frameworks for longevity products in preparation for 1 July 2026 effective date
Evaluate whether to adopt the AILP methodology based on portfolio characteristics and new risk control requirements
Submit feedback on APRA's AILP reporting template by 12 May 2026

Source document (simplified)

Media Releases

APRA finalises changes to the capital treatment of longevity products to improve retirement outcomes

Tuesday 31 March 2026

Print Email The Australian Prudential Regulation Authority (APRA) has finalised amendments to its prudential standards on the capital treatment of longevity products, including annuities, to strengthen the market for retirement income products.

The reforms reflect APRA’s commitment to support innovation and reduce unnecessary regulatory constraints, while maintaining strong prudential safeguards. Better aligning capital settings with the long-term nature of longevity liabilities enhances capital efficiency and creates a more proportionate and risk-sensitive framework.

APRA Member Suzanne Smith said: “We’re backing innovation in retirement income and we’re doing it safely. As the prudential regulator, we always look for opportunities to refine our requirements. These adjustments to capital settings will free up insurers to invest in sustainable, competitively priced products that help Australians retire with greater confidence.”

The key change is the introduction of an option for insurers to use an advanced illiquidity premium (AILP) when determining capital requirements for longevity products. This approach better reflects the long‑term nature of these liabilities. To underpin the AILP option, APRA has also introduced additional risk controls relating to the governance, reporting and asset composition of portfolios to which it is applied. Together, the reforms provide a more risk-sensitive, principles‑based approach that reduces procyclicality in capital settings, while maintaining appropriate safeguards.

The final reform contributes to APRA’s strategic objective of ‘getting the balance right’ by ensuring its regulation is efficient and proportionate. It follows two rounds of consultation with industry feedback strongly supporting the changes.

The final prudential standards and APRA’s response paper are available at: Proposed changes to capital framework for annuity products

The reforms will come into effect on 1 July 2026. To support implementation, APRA has released a reporting template for insurers who choose to use the AILP and is seeking feedback on the template by 12 May 2026.

Media enquiries

Contact APRA Media Unit, on +61 2 9210 3636

All other enquiries

For more information contact APRA on 1300 558 849.
The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding $9.8 trillion in assets for Australian depositors, policyholders and superannuation fund members.