Australia's insurance regulator on Thursday proposed to limit the exposure of life insurers to offshore reinsurers, given its lack of oversight of foreign players.

The Australian Prudential Regulation Authority (APRA) said it was starting a consultation period that would end on June 25, to set a standard by the end of the year.

"The recent growth in life insurers placing business with offshore reinsurers has been a prudential concern, as APRA does not have regulatory authority over these reinsurers," the regulator's Deputy Chair Helen Rowell said.

As part of the draft proposal, APRA plans to raise its aggregate limit for the value of assets of statutory fund for offshore reinsurers to 12.5% from the 5.0% proposed in 2019.

The proposal will not materially increase the vulnerability of the country's financial system to global events and allows APRA to oversee enough of the Australian life insurance market, according to the regulator.