{"id":"F2019L00632","name":"Insurance (prudential standard) determination No. 5 of 2019","slug":"insurance-prudential-standard-determination-no-5-of-2019","collection":"legislative_instrument","jurisdiction":"commonwealth","status":"repealed","isInForce":false,"actNumber":null,"makingDate":null,"administeringDepartment":null,"currentVersion":{"id":99250,"registerId":"commonwealth-F2019L00632-current","compilationNumber":null,"startDate":"2026-04-02","status":"Repealed","reasons":null,"registeredAt":null},"sections":[{"sectionNumber":"Prudential Standard GPS 115","sectionType":"section","heading":"Prudential Standard GPS 115","content":"##### ![](image.002.png)\n\n##### Prudential Standard GPS 115\n\n# Capital Adequacy: Insurance Risk Charge\n\n| Objective and key requirements of this Prudential StandardThis 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. |\n| ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |\n\n \nAuthority\n\n1. This Prudential Standard is made under section 32 of the Insurance Act 1973 (the Act).\n\nApplication\n\n2. This Prudential Standard applies to each:\n\n(a) general insurer authorised under the Act (insurer); and\n\n(b) Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001).\n\nWhere a requirement is made in respect of a Level 2 insurance group, the requirement is imposed on the parent entity of the Level 2 insurance group.\n\n3. This Prudential Standard applies to insurers and Level 2 insurance groups (regulated institutions) from 1 July 2019.\n\nInterpretation\n\n4. Terms that are defined in GPS 001 appear in bold the first time they are used in this Prudential Standard.\n\n5. For the purposes of this Prudential Standard the term ‘Actuary’ is a reference to either the Appointed Actuary for an insurer or the Group Actuary for a Level 2 insurance group (as appropriate).\n\nInsurance Risk Charge\n\n6. This Prudential Standard sets out the method for calculating the Insurance Risk Charge for a regulated institution using the Standard Method to determine its prescribed capital amount.\n\n7. The Insurance Risk Charge relates to the risk that the value of net insurance liabilities is greater than the value determined in accordance with Prudential Standard GPS 340 Insurance Liability Valuation(GPS 340). It has two components:\n\n(a) a risk charge in respect of Outstanding Claims Risk; and\n\n(b) a risk charge in respect of Premiums Liability Risk.\n\nThe total Insurance Risk Charge is the sum of the risk charge for each of the two components.\n\nOutstanding Claims Risk\n\n8. The risk charge for Outstanding Claims Risk relates to the risk that the value of the net outstanding claims liabilities will be greater than the value determined in accordance with GPS 340.\n\n9. For the purposes of the Standard Method, the risk charge for each class of business is calculated by multiplying the net outstanding claims liabilities for that class (as determined in accordance with GPS 340) by the relevant Outstanding Claims Risk Capital Factor in Attachment A. The total risk charge for outstanding claims risk is the sum of the risk charges for each class of business.\n\nPremiums Liability Risk\n\n10. The risk charge for Premiums Liability Risk relates to the risk that the value of the net premiums liabilities will be greater than the value determined in accordance with GPS 340. It also relates to the risk that ‘material net written premium’, as defined in paragraph 17, will be insufficient to fund the liabilities arising from that business.\n\n11. For the purposes of the Standard Method, the risk charge for each class of business is calculated by multiplying the sum of:\n\n(a) net premiums liabilities as determined in accordance with GPS 340; and\n\n(b) material net written premiums\n\nby the relevant Premiums Liability Risk Capital Factor in Attachment A. The total risk charge for Premiums Liability Risk is the sum of the risk charges for Premiums Liability Risk for each class of business.\n\nClasses of business\n\n12. For the purposes of the Outstanding Claims Risk Capital Factor and Premiums Liability Risk Capital Factor, all but the ‘other’ direct class of business[\\[1\\]](#_ftn1) and ‘other’ reinsurance class of business have been classified into different categories in Attachment A (Table 1 and Table 2 respectively). The ‘other’ class of business must be allocated to a category by the Actuary, in accordance with paragraphs 13 and 14.\n\n13. For the purpose of calculating the Insurance Risk Charge in respect of any ‘other’ business (whether it is direct business or reinsurance), the Actuary is required to determine the most appropriate category (i.e. category A, B or C) in Table 1 and Table 2 of Attachment A. The choice must be based on the underlying risk characteristics of the business being written. The regulated institution must then apply the corresponding Outstanding Claims Risk Capital Factor and Premiums Liability Risk Capital Factor listed in Attachment A in determining the Insurance Risk Charge.\n\n14. If the ‘other’ class of business includes multiple risks with differing risk profiles, the Actuary may subdivide the net outstanding claims liabilities, net premiums liabilities and material net written premiums into more than one category.\n\n15. The reasons for selecting the specific risk category or categories to which the ‘other’ class of business is assigned must be documented in the Actuarial Valuation Report.\n\nBusiness covering multiple classes\n\n16. Where a regulated institution underwrites an inwards reinsurance contract which spans multiple classes, the contract must be allocated by using an appropriate method (provided the same method is used for all contracts and all subsequent periods). Appropriate methods include:\n\n(a) allocating the contract on a pro rata basis to each of the relevant categories; or\n\n(b) allocating the contract to the category which represents the greatest exposure; or\n\n(c) allocating the contract to the category representing the greatest premium income.\n\nThe regulated institution may use an alternative method from those listed above for allocating inwards reinsurance business that spans multiple classes. The regulated institution must be able to demonstrate that the chosen method is appropriate and is used for all contracts and all subsequent periods.\n\nMaterial net written premium\n\n17. With respect to direct business and reinsurance business where policies incept in the following reporting period and where these policies would have a material impact on capital adequacy, net written premium for exposure that has not been included in the calculation of the premiums liabilities is to be subject to the premiums liabilities risk charge.[\\[2\\]](#_ftn2) This premium amount is defined as ‘material net written premium’. The materiality of the business that incepts in the next reporting period should be determined in accordance with the Australian accounting and auditing standards subject to APRA’s discretion.\n\n18. The value of material net written premium calculated in paragraph 17 must also reflect the full premium revenue for inwards proportional reinsurance for the full term of the current reinsurance contract where the treaty extends beyond the end of the current reporting period but the revenue has not yet been recognised.[\\[3\\]](#_ftn3)\n\nSecuritisation\n\n19. If a regulated institution securitises insurance liabilities, the net insurance liabilities may reduce. The regulated institution must apply to APRA for approval to include the securitisation transaction in the Insurance Risk Charge.\n\nAdjustments and exclusions\n\n20. APRA may, by notice in writing to a regulated institution, adjust or exclude a specific requirement in this Prudential Standard in relation to that regulated institution.\n\n# Determinations made under previous prudential standards\n\n21. An exercise of APRA’s discretion under the previous version of this Prudential Standard continues to have effect under this Prudential Standard. For the purposes of this paragraph, ‘the previous version of this Prudential Standard’ means Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115) made on7 December 2012.\n\nAttachment A\n\nTable 1: Direct insurance business\n\n| Category | Class of business | OutstandingClaims RiskCapital Factor(%) | Premiums Liability Risk Capital Factor(%) |\n| -------- | --------------------------------------------------------------------------------- | --------------------------------------- | ----------------------------------------- |\n| A | HouseholdersCommercial MotorDomestic Motor | 9.0 | 13.5 |\n| B | TravelFire and ISRMarine and AviationConsumer CreditOther Accident | 11.0 | 16.5 |\n| C | MortgageCTPPublic and Product LiabilityProfessional IndemnityEmployers’ Liability | 14.0 | 21.0 |\n\n##### Table 2: Inwards reinsurance business\n\n```html\n

Category

Class of business

Reinsurance type

Outstanding Claims Risk Capital Factor

(%)

Premiums Liability Risk Capital Factor

(%)

A

Householders

Commercial Motor

Domestic Motor

Proportional

10.0

15.0

Non-proportional

12.0

18.0

B

Travel

Fire and ISR

Marine and Aviation

Consumer Credit

Other Accident

Proportional

12.0

18.0

Non-proportional

14.0

21.0

C

Mortgage

CTP

Public and Product Liability

Professional Indemnity

Employers’ Liability

Proportional

15.0

22.5

Non-proportional

17.0

25.5

\n```","sortOrder":0},{"sectionNumber":"Capital Adequacy: Insurance Risk Charge","sectionType":"part","heading":"Capital Adequacy: Insurance Risk Charge","content":"# Capital Adequacy: Insurance Risk Charge\n\n| Objective and key requirements of this Prudential StandardThis 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. |\n| ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |\n\n \nAuthority\n\n1. This Prudential Standard is made under section 32 of the Insurance Act 1973 (the Act).\n\nApplication\n\n2. This Prudential Standard applies to each:\n\n(a) general insurer authorised under the Act (insurer); and\n\n(b) Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001).\n\nWhere a requirement is made in respect of a Level 2 insurance group, the requirement is imposed on the parent entity of the Level 2 insurance group.\n\n3. This Prudential Standard applies to insurers and Level 2 insurance groups (regulated institutions) from 1 July 2019.\n\nInterpretation\n\n4. Terms that are defined in GPS 001 appear in bold the first time they are used in this Prudential Standard.\n\n5. For the purposes of this Prudential Standard the term ‘Actuary’ is a reference to either the Appointed Actuary for an insurer or the Group Actuary for a Level 2 insurance group (as appropriate).\n\nInsurance Risk Charge\n\n6. This Prudential Standard sets out the method for calculating the Insurance Risk Charge for a regulated institution using the Standard Method to determine its prescribed capital amount.\n\n7. The Insurance Risk Charge relates to the risk that the value of net insurance liabilities is greater than the value determined in accordance with Prudential Standard GPS 340 Insurance Liability Valuation(GPS 340). It has two components:\n\n(a) a risk charge in respect of Outstanding Claims Risk; and\n\n(b) a risk charge in respect of Premiums Liability Risk.\n\nThe total Insurance Risk Charge is the sum of the risk charge for each of the two components.\n\nOutstanding Claims Risk\n\n8. The risk charge for Outstanding Claims Risk relates to the risk that the value of the net outstanding claims liabilities will be greater than the value determined in accordance with GPS 340.\n\n9. For the purposes of the Standard Method, the risk charge for each class of business is calculated by multiplying the net outstanding claims liabilities for that class (as determined in accordance with GPS 340) by the relevant Outstanding Claims Risk Capital Factor in Attachment A. The total risk charge for outstanding claims risk is the sum of the risk charges for each class of business.\n\nPremiums Liability Risk\n\n10. The risk charge for Premiums Liability Risk relates to the risk that the value of the net premiums liabilities will be greater than the value determined in accordance with GPS 340. It also relates to the risk that ‘material net written premium’, as defined in paragraph 17, will be insufficient to fund the liabilities arising from that business.\n\n11. For the purposes of the Standard Method, the risk charge for each class of business is calculated by multiplying the sum of:\n\n(a) net premiums liabilities as determined in accordance with GPS 340; and\n\n(b) material net written premiums\n\nby the relevant Premiums Liability Risk Capital Factor in Attachment A. The total risk charge for Premiums Liability Risk is the sum of the risk charges for Premiums Liability Risk for each class of business.\n\nClasses of business\n\n12. For the purposes of the Outstanding Claims Risk Capital Factor and Premiums Liability Risk Capital Factor, all but the ‘other’ direct class of business[\\[1\\]](#_ftn1) and ‘other’ reinsurance class of business have been classified into different categories in Attachment A (Table 1 and Table 2 respectively). The ‘other’ class of business must be allocated to a category by the Actuary, in accordance with paragraphs 13 and 14.\n\n13. For the purpose of calculating the Insurance Risk Charge in respect of any ‘other’ business (whether it is direct business or reinsurance), the Actuary is required to determine the most appropriate category (i.e. category A, B or C) in Table 1 and Table 2 of Attachment A. The choice must be based on the underlying risk characteristics of the business being written. The regulated institution must then apply the corresponding Outstanding Claims Risk Capital Factor and Premiums Liability Risk Capital Factor listed in Attachment A in determining the Insurance Risk Charge.\n\n14. If the ‘other’ class of business includes multiple risks with differing risk profiles, the Actuary may subdivide the net outstanding claims liabilities, net premiums liabilities and material net written premiums into more than one category.\n\n15. The reasons for selecting the specific risk category or categories to which the ‘other’ class of business is assigned must be documented in the Actuarial Valuation Report.\n\nBusiness covering multiple classes\n\n16. Where a regulated institution underwrites an inwards reinsurance contract which spans multiple classes, the contract must be allocated by using an appropriate method (provided the same method is used for all contracts and all subsequent periods). Appropriate methods include:\n\n(a) allocating the contract on a pro rata basis to each of the relevant categories; or\n\n(b) allocating the contract to the category which represents the greatest exposure; or\n\n(c) allocating the contract to the category representing the greatest premium income.\n\nThe regulated institution may use an alternative method from those listed above for allocating inwards reinsurance business that spans multiple classes. The regulated institution must be able to demonstrate that the chosen method is appropriate and is used for all contracts and all subsequent periods.\n\nMaterial net written premium\n\n17. With respect to direct business and reinsurance business where policies incept in the following reporting period and where these policies would have a material impact on capital adequacy, net written premium for exposure that has not been included in the calculation of the premiums liabilities is to be subject to the premiums liabilities risk charge.[\\[2\\]](#_ftn2) This premium amount is defined as ‘material net written premium’. The materiality of the business that incepts in the next reporting period should be determined in accordance with the Australian accounting and auditing standards subject to APRA’s discretion.\n\n18. The value of material net written premium calculated in paragraph 17 must also reflect the full premium revenue for inwards proportional reinsurance for the full term of the current reinsurance contract where the treaty extends beyond the end of the current reporting period but the revenue has not yet been recognised.[\\[3\\]](#_ftn3)\n\nSecuritisation\n\n19. If a regulated institution securitises insurance liabilities, the net insurance liabilities may reduce. The regulated institution must apply to APRA for approval to include the securitisation transaction in the Insurance Risk Charge.\n\nAdjustments and exclusions\n\n20. APRA may, by notice in writing to a regulated institution, adjust or exclude a specific requirement in this Prudential Standard in relation to that regulated institution.\n\n# Determinations made under previous prudential standards\n\n21. An exercise of APRA’s discretion under the previous version of this Prudential Standard continues to have effect under this Prudential Standard. For the purposes of this paragraph, ‘the previous version of this Prudential Standard’ means Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115) made on7 December 2012.\n\nAttachment A\n\nTable 1: Direct insurance business\n\n| Category | Class of business | OutstandingClaims RiskCapital Factor(%) | Premiums Liability Risk Capital Factor(%) |\n| -------- | --------------------------------------------------------------------------------- | --------------------------------------- | ----------------------------------------- |\n| A | HouseholdersCommercial MotorDomestic Motor | 9.0 | 13.5 |\n| B | TravelFire and ISRMarine and AviationConsumer CreditOther Accident | 11.0 | 16.5 |\n| C | MortgageCTPPublic and Product LiabilityProfessional IndemnityEmployers’ Liability | 14.0 | 21.0 |\n\n##### Table 2: Inwards reinsurance business\n\n```html\n

Category

Class of business

Reinsurance type

Outstanding Claims Risk Capital Factor

(%)

Premiums Liability Risk Capital Factor

(%)

A

Householders

Commercial Motor

Domestic Motor

Proportional

10.0

15.0

Non-proportional

12.0

18.0

B

Travel

Fire and ISR

Marine and Aviation

Consumer Credit

Other Accident

Proportional

12.0

18.0

Non-proportional

14.0

21.0

C

Mortgage

CTP

Public and Product Liability

Professional Indemnity

Employers’ Liability

Proportional

15.0

22.5

Non-proportional

17.0

25.5

\n```","sortOrder":1},{"sectionNumber":"Objective and key requirements of this P","sectionType":"division","heading":"Objective and key requirements of this Prudential Standard","content":"### Objective and key requirements of this Prudential Standard\n\nThis Prudential Standard requires a general insurer or Level 2 insurance group to maintain adequate capital against the insurance risks associated with its activities.\n\nThe 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.\n\nThe 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.\n\nThis 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.","sortOrder":2},{"sectionNumber":"Determinations made under previous prude","sectionType":"part","heading":"Determinations made under previous prudential standards","content":"# Determinations made under previous prudential standards\n\n21. An exercise of APRA’s discretion under the previous version of this Prudential Standard continues to have effect under this Prudential Standard. For the purposes of this paragraph, ‘the previous version of this Prudential Standard’ means Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115) made on7 December 2012.\n\nAttachment A\n\nTable 1: Direct insurance business\n\n| Category | Class of business | OutstandingClaims RiskCapital Factor(%) | Premiums Liability Risk Capital Factor(%) |\n| -------- | --------------------------------------------------------------------------------- | --------------------------------------- | ----------------------------------------- |\n| A | HouseholdersCommercial MotorDomestic Motor | 9.0 | 13.5 |\n| B | TravelFire and ISRMarine and AviationConsumer CreditOther Accident | 11.0 | 16.5 |\n| C | MortgageCTPPublic and Product LiabilityProfessional IndemnityEmployers’ Liability | 14.0 | 21.0 |\n\n##### Table 2: Inwards reinsurance business\n\n```html\n

Category

Class of business

Reinsurance type

Outstanding Claims Risk Capital Factor

(%)

Premiums Liability Risk Capital Factor

(%)

A

Householders

Commercial Motor

Domestic Motor

Proportional

10.0

15.0

Non-proportional

12.0

18.0

B

Travel

Fire and ISR

Marine and Aviation

Consumer Credit

Other Accident

Proportional

12.0

18.0

Non-proportional

14.0

21.0

C

Mortgage

CTP

Public and Product Liability

Professional Indemnity

Employers’ Liability

Proportional

15.0

22.5

Non-proportional

17.0

25.5

\n```","sortOrder":3},{"sectionNumber":"Category","sectionType":"part","heading":"Category","content":"# Category","sortOrder":4},{"sectionNumber":"Class of business","sectionType":"part","heading":"Class of business","content":"# Class of business","sortOrder":5},{"sectionNumber":"B","sectionType":"section","heading":"B","content":"###### B","sortOrder":6},{"sectionNumber":"Travel","sectionType":"section","heading":"Travel","content":"###### Travel\n\n###### Fire and ISR\n\nMarine and Aviation\n\nConsumer Credit\n\n###### Other Accident","sortOrder":7},{"sectionNumber":"Fire and ISR","sectionType":"section","heading":"Fire and ISR","content":"###### Fire and ISR\n\nMarine and Aviation\n\nConsumer Credit","sortOrder":8},{"sectionNumber":"Other Accident","sectionType":"section","heading":"Other Accident","content":"###### Travel\n\n###### Fire and ISR\n\nMarine and Aviation\n\nConsumer Credit\n\n###### Other Accident","sortOrder":9},{"sectionNumber":"C","sectionType":"section","heading":"C","content":"###### C","sortOrder":10},{"sectionNumber":"Mortgage","sectionType":"section","heading":"Mortgage","content":"###### Mortgage\n\n###### CTP\n\nPublic and Product Liability\n\nProfessional Indemnity\n\nEmployers’ Liability","sortOrder":11},{"sectionNumber":"CTP","sectionType":"section","heading":"CTP","content":"###### CTP\n\nPublic and Product Liability\n\nProfessional Indemnity\n\nEmployers’ Liability","sortOrder":12},{"sectionNumber":"Table 2: Inwards reinsurance business","sectionType":"section","heading":"Table 2: Inwards reinsurance business","content":"##### Table 2: Inwards reinsurance business\n\n```html\n

Category

Class of business

Reinsurance type

Outstanding Claims Risk Capital Factor

(%)

Premiums Liability Risk Capital Factor

(%)

A

Householders

Commercial Motor

Domestic Motor

Proportional

10.0

15.0

Non-proportional

12.0

18.0

B

Travel

Fire and ISR

Marine and Aviation

Consumer Credit

Other Accident

Proportional

12.0

18.0

Non-proportional

14.0

21.0

C

Mortgage

CTP

Public and Product Liability

Professional Indemnity

Employers’ Liability

Proportional

15.0

22.5

Non-proportional

17.0

25.5

\n```","sortOrder":13}],"analysis":{"flash_summary":{"complexity_score":6,"scope_assessment":{"changed":false,"description":"The instrument reissues GPS 115 effective 1 July 2019 and preserves prior exercises of APRA discretion (para 21). The text does not expressly expand or narrow the classes of entities subject to the Standard beyond authorised general insurers and Level 2 insurance groups (paras 2–3)."},"complexity_factors":["Actuarial classification discretion: Actuary must allocate 'other' business to categories and may subdivide mixed-risk business (paras 12–15) — requires judgement and documentation in the Actuarial Valuation Report (para 15).","Two-component calculation: Separate percentage factors apply to Outstanding Claims Risk and Premiums Liability Risk, summed across classes (paras 7–11, Attachment A) — requires class-level granularity.","Attachment-based factors: Fixed capital factors by category and reinsurance type are prescribed in Attachment A (Table 1 and Table 2) — implementation requires mapping product lines to tables.","Material net written premium treatment: Premiums not yet recognised but material for next reporting period must be included, with materiality judged under accounting/auditing standards subject to APRA discretion (paras 17–18).","Reinsurance allocation rules: Inwards reinsurance spanning multiple classes must be consistently allocated using specified or demonstrably appropriate methods (para 16) — operational and reporting burden.","Securitisation approval requirement: Inclusion of securitisation effects in the charge requires APRA approval (para 19) — creates an approval gate and supervisory discretion.","APRA discretion and legacy determinations: APRA can adjust or exclude requirements for a regulated institution (para 20) and prior discretions continue to have effect (para 21) — adds regulatory variability.","Board-level responsibility: Board retains ultimate responsibility for capital adequacy (paras under Objective and para 2) — governance and accountability implications for insurers."],"plain_english_summary":"This Prudential Standard prescribes how authorised general insurers and Level 2 insurance groups calculate the Insurance Risk Charge — a minimum capital amount to cover the risk that actuarial valuations understate insurance liabilities. It makes actuaries allocate business into risk categories and apply fixed percentage factors to net outstanding claims and premium liabilities, and leaves ultimate capital oversight with the Board (paras 2,5,9–11). APRA may approve securitisations and exercise discretion to adjust or exclude requirements (paras 19–21), affecting capital, pricing and reinsurance decisions."},"kimi_summary":{"_metrics":{"model":"kimi-k2.5","source":"moonshot-realtime","completionTokens":1839},"content_quality":"ok","complexity_score":6,"scope_assessment":{"changed":false,"description":"This instrument replaces the previous version of GPS 115 made in December 2012. It maintains the same fundamental scope of establishing capital adequacy requirements for insurance risk. The document explicitly preserves determinations made under the previous version, indicating this is a regulatory update rather than an expansion of scope."},"complexity_factors":["Cross-references to two other prudential standards (GPS 001 Definitions and GPS 340 Insurance Liability Valuation)","Mathematical calculations requiring actuarial expertise (net outstanding claims liabilities, net premiums liabilities, material net written premium)","Three-tier categorisation system (Categories A, B, C) with different capital factors for each","Distinction between direct insurance and inwards reinsurance, with further split between proportional and non-proportional reinsurance types","Actuarial discretion required for classifying 'other' business not explicitly categorised","Conditional logic for materiality thresholds and multi-class contract allocation methods","Specific adjustment rules for securitisation transactions requiring APRA approval"],"plain_english_summary":"This APRA prudential standard sets a minimum capital buffer — the \"Insurance Risk Charge\" — for Australian general insurers and Level 2 insurance groups to guard against claims costing more than actuarial estimates. It requires insurers to hold charges for outstanding claims and future premiums using prescribed, risk-based percentage factors that rise with riskier lines of business, with the board ultimately responsible for ensuring adequate capital."}},"importantCases":[],"_links":{"self":"/api/acts/insurance-prudential-standard-determination-no-5-of-2019","history":"/api/acts/insurance-prudential-standard-determination-no-5-of-2019/history","analysis":"/api/acts/insurance-prudential-standard-determination-no-5-of-2019/analysis","conflicts":"/api/acts/insurance-prudential-standard-determination-no-5-of-2019/conflicts","importantCases":"/api/acts/insurance-prudential-standard-determination-no-5-of-2019/important-cases","documents":"/api/acts/insurance-prudential-standard-determination-no-5-of-2019/documents"}}