Insurance (prudential standard) determination No. 5 of 2023 (Cth)

Insurance (prudential standard) determination

No. 5 of 2023

Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge

Insurance Act 1973

I, Helen Rowell, a delegate of APRA:

(a) under subsection 32(4) of the Insurance Act 1973 (the Act), revoke Insurance (prudential standard) determination No. 5 of 2019, including Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge, made under that Determination; and

(b) under subsection 32(1) of the Act determine Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge, in the form set out in the Schedule, which applies to:

(i) all general insurers and authorised NOHCs; and

(ii) a subsidiary of a general insurer or authorised NOHC, where that subsidiary is a parent entity of a Level 2 insurance group.

This instrument commences on 1 July 2023. Dated: 24 May 2023

[Signed]

Helen Rowell Deputy Chair

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.

authorised NOHC has the meaning given in section 3 of the Act.

general insurer has the meaning given in section 11 of the Act.

Level 2 insurance group has the meaning given in Prudential Standard GPS 001 Definitions.

parent entity has the meaning given in Prudential Standard GPS 001 Definitions.

subsidiary has the meaning given in Prudential Standard GPS 001 Definitions.

Schedule

Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge, comprises the document commencing on the following page.

Prudential Standard GPS 115

Capital Adequacy: Insurance Risk Charge Objectives and key requirements of this Prudential Standard This Prudential Standard requires a general insurer or Level 2 insurance group to maintain adequate capital against the insurance risks associated with its activities. The ultimate responsibility for the prudent management of capital of a general insurer or Level 2 insurance group rests with its Board of directors. The Board must ensure that the general insurer or Level 2 insurance group maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances. The Insurance Risk Charge is the minimum amount of capital required to be held against insurance risks. The Insurance Risk Charge relates to the risk that the value of the net insurance liabilities is greater than the value determined by the Appointed Actuary or Group Actuary. This Prudential Standard sets out the method for calculating the Insurance Risk Charge. This charge is one of the components of the Standard Method for calculating the prescribed capital amount for general insurers and Level 2 insurance groups.