• Consultation on capital settings for annuity products
• Proposals represent significant improvement on current prudential settings
• More risk-sensitive framework to reduce procyclicality

Challenger Limited (ASX:CGF) welcomes APRA's consultation on capital settings for annuity products, and its direction in moving towards a more market sensitive illiquidity premium with appropriate risk controls. This is an important regulatory reform that will help to develop Australia's retirement income market by promoting innovation, supporting greater take up of lifetime income products and enabling greater choice and certainty for retirees. The proposals outlined in the consultation represent a significant improvement on Australia's current prudential capital settings through closer alignment between asset and liability cashflows, creating a more appropriate environment for the provision of annuity products through lowering the levels of required capital. A more risk sensitive framework will also reduce the procyclicality that life insurers face during market downturns. Challenger welcomes progress on this initiative that will improve annuity offerings for all Australians and support guaranteed income being an integral part of the retirement planning process. The proposals will also improve the financial resilience of life insurers and establish a more favourable environment to grow the annuity market and provide reliable, guaranteed income streams in retirement.

The proposed regulatory reforms will promote innovation, support greater take-up of lifetime income products, and enable greater choice and certainty for retirees. The changes will also improve the financial resilience of life insurers and establish a more favourable environment to grow the annuity market.