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Illiquid investments causing chain reaction
The Australian Prudential Regulation Authority (APRA) has warned trustees that they must review the terms of life insurance policy contracts where difficulties relating to underlying illiquid investments emerge.
APRA said it has been monitoring relief applications from trustees regarding the treatment of illiquid investments.
The regulator said many of the relief applications involve investments into life insurance policies or pooled super trusts (PST), with a number of super funds invested in life policies or PSTs that have subsequently been invested in underlying vehicles which have now become illiquid.
APRA said it expects trustees to review the terms of the life policy contract in order to determine if the life insurer/trustee of the PST has the capacity to cease payments to the superannuation fund in respect of the frozen investment. The regulator said this is an issue that has not always been considered by trustees.
Relief applications will continue to be considered on a case-by-case basis, APRA said.
AUTHOR
Mike Taylor
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