Federal Register of Legislation
Life Insurance (prudential standard) determination
No. 10 of 2023
Prudential Standard LPS 118 Capital Adequacy: Operational Risk Charge
Life Insurance Act 1995
I, Helen Rowell, a delegate of APRA:
(a) under subsection 230A(5) of the Life Insurance Act 1995 (the Act) revoke Life Insurance (prudential standard) determination No. 7 of 2012, including Prudential Standard LPS 118 Capital Adequacy: Operational Risk Charge made under that Determination; and
(b) under subsection 230A(1) of the Act determine Prudential Standard LPS 118 Capital Adequacy: Operational Risk Charge, which applies to all life companies, including friendly societies.
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.
friendly society has the meaning given in section 16C of the Act.
life company has the meaning given in the Schedule to the Act.
Schedule
Prudential Standard LPS 118 Capital Adequacy: Operational Risk Charge, comprises the document commencing on the following page.
Prudential Standard LPS 118
Capital Adequacy: Operational Risk Charge Objectives and key requirements of this Prudential Standard This Prudential Standard requires a life company to maintain adequate capital against the operational risks associated with its activities. The ultimate responsibility for the prudent management of capital of a life company rests with its Board of directors. The Board must ensure that the life company 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 Operational Risk Charge is the minimum amount of capital required to be held against operational risks. The Operational Risk Charge relates to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. This Prudential Standard sets out the method for calculating the Operational Risk Charge. This charge is one of the components of the Standard Method for calculating the prescribed capital amount for life company statutory funds and general funds.
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