Financial Sector (Collection of Data) (reporting standard) determination No. 112 of 2023
Table 2: Prescribed Capital Amount (LifeTable 2: Prescribed Capital Amount (Life Company)
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Tables described in this Reporting Standard list each of the data fields required to be reported. The data fields are listed sequentially in the column order that they will appear in the reported data set. Constraints on the data that can be reported for each field have also been provided.
Definitions
Terms highlighted in bold italics indicate that the definition is provided in these instructions.
A
Adjustments to prescribed capital amount as approved by APRA
These are adjustments made to a fund’s prescribed capital amount if APRA is of the view that the Standard Method for calculating the prescribed capital amount does not produce an appropriate outcome in respect of a fund, or if a life company has used inappropriate judgement or estimation in calculating the prescribed capital amount for that fund.Approved adjustments are to be reported separately in Table 1 of Reporting Standard LRS 111.0 Adjustments and Exclusions highlighting the description of the adjustment, transitional status and amount of adjustment applied.
Aggregate risk charge for variable annuities
This amount is the aggregate risk charge for variable annuity business that relates to asset and insurance risks, after allowance for diversification.This must be determined in accordance with the prescribed approach set out in LPS 110.
Aggregation benefit
The aggregation benefit relates to the recognition of diversification benefits between asset and insurance risks for life business other than variable annuities.This must be calculated in accordance with the prescribed formula in LPS 110.
Asset Concentration Risk Charge
The Asset Concentration Risk Charge is the minimum amount of capital required to be held against asset concentration risks. The Asset Concentration Risk Charge relates to the risk resulting from investment concentrations in individual assets or large exposures to individual counterparties or groups of related counterparties resulting in adverse movements in the fund’s capital base.This must be determined in accordance with Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge.
Asset Risk Charge
The Asset Risk Charge is the minimum amount of capital required to be held against asset risks. The Asset Risk Charge relates to the risk of adverse movements in the value of the fund’s capital base due to credit or market risks.This must be determined in accordance with Prudential Standard LPS 114 Capital Adequacy: Asset Risk Charge (LPS 114).
A life company must calculate, for each of its funds, the risk charge components defined in LPS 114 by considering the impact on the capital base of the fund of a range of stresses. These risk charge components are then aggregated using the formula set out in LPS 114. The result of applying the formula is defined as the Asset Risk Charge - aggregated risk charge component.
Asset Risk Charge - impact of diversification
The Asset Risk Charge - impact of diversification relates to the recognition of diversification benefits between the asset risk charge components as set out in LPS 114.This must be calculated as the sum of the risk charge components less the Asset Risk Charge - aggregated risk charge component.
C
Combined Stress Scenario Adjustment
This Combined Stress Scenario tests whether the tax benefits recognised in determining the Insurance Risk Charge and the Asset Risk Charge can be offset against deferred tax liabilities. It also tests whether any future management actions allowed for in the calculation of the Insurance Risk Charge and the Asset Risk Charge would be achievable. This item also recognises any second order interactions between the asset and insurance risk stresses.This adjustment must be determined in accordance with LPS 110.
I
Insurance Risk Charge
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 of adverse impacts due to movements in future mortality, morbidity, longevity, servicing expenses and lapses.This must be determined in accordance with Prudential Standard LPS 115 Capital Adequacy: Insurance Risk Charge.
L
Life company fund
This means the type of life company fund. Possible types are:statutory fund;shareholder fund;benefit fund; andmanagement fund.
O
Operational Risk Charge
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 must be determined in accordance with Prudential Standard LPS 118 Capital Adequacy: Operational Risk Charge (LPS 118).
Operational Risk Charge for investment-linked business (ORCI)
This is the Operational Risk Charge relating to the fund's investment-linked business.The ORCI must be calculated in accordance with LPS 118.
Operational Risk Charge for other business (ORCO)
This is the Operational Risk Charge relating to the fund's businesses other than risk and investment-linked business.The ORCO must be calculated in accordance with LPS 118.
Operational Risk Charge for risk business (ORCR)
This is the Operational Risk Charge relating to the fund's risk business.The ORCR must be calculated in accordance with LPS 118.
P
Prescribed capital amount
The prescribed capital amount for the fund is calculated as the sum of:Asset Risk Charge;Insurance Risk Charge;Aggregate risk charge for variable annuities;Asset Concentration Risk Charge;Operational Risk Charge;Combined Stress Scenario Adjustment; andadjustments to prescribed capital amount as approved by APRAless:aggregation benefit.The prescribed capital amount for a life company is subject to a minimum of $10 million, and will be automatically applied where the calculated sum of risk charge components is less than this amount.
R
Risk charge components
The risk charge components, as set out in LPS 114, are calculated by determining the fall in the capital base of the regulated institution in seven stress tests.
Specific Instructions
Table 1: Prescribed Capital Amount (Individual Funds)
Reporting basis
This table applies to life companies including friendly societies. This table applies to statutory, shareholder, benefit and management funds.
Report all information as at the reporting date.
Units of measurement
Values in this table must be completed in whole Australian dollars.
Column 1
Report the value for each of the items listed below.
1. Asset Risk Charge
Item 1
Report Asset Risk Charge.
Item 1.1
Report Asset Risk Charge - impact of diversification.Report this item as a positive number.
Report aggregate risk charge for variable annuities.
4. Asset Concentration Risk Charge
Item 4
Report Asset Concentration Risk Charge.
5. Operational Risk Charge
Item 5
Report Operational Risk Charge.
Item 5.1
Report Operational Risk Charge for risk business (ORCR).
Item 5.2
Report Operational Risk Charge for investment-linked business (ORCI).
Item 5.3
Report Operational Risk Charge for other business (ORCO).
6. Aggregation benefit
Item 6
Report aggregation benefit.An aggregation benefit which would result in a decrease to prescribed capital amount should be reported as a positive value.
7. Combined Stress Scenario Adjustment
Item 7
Report Combined Stress Scenario Adjustment.
8. Adjustments to prescribed capital amount as approved by APRA
Item 8
Report the value of any adjustments to the prescribed capital amount as approved by APRA.Report adjustments that would result in an increase to prescribed capital amount as a positive value.
9. Prescribed capital amount
Item 9
Prescribed capital amount is a derived item and is calculated as the sum of:item 1;item 2;item 3;item 4;item 5;item 7; anditem 8less:item 6.
Table 2: Prescribed Capital Amount (Life Company)
Reporting basis
This table applies to life companies including friendly societies. Data must be submitted at the level of the life company.
Report all information as at the reporting date.
Units of measurement
Values in this table must be completed in whole Australian dollars.
Column 1
Report the value for each of the items listed below.
1. Asset Risk Charge
Item 1
Report Asset Risk Charge.
2. Insurance Risk Charge
Item 2
Report Insurance Risk Charge.
3. Aggregate risk charge for variable annuities
Item 3
Report aggregate risk charge for variable annuities.
4. Asset Concentration Risk Charge
Item 4
Report Asset Concentration Risk Charge.
5. Operational Risk Charge
Item 5
Report Operational Risk Charge.
6. Aggregation benefit
Item 6
Report aggregation benefit.An aggregation benefit which would result in a decrease to prescribed capital amount should be reported as a positive value.
7. Combined Stress Scenario Adjustment
Item 7
Report Combined Stress Scenario Adjustment.
8. Adjustments to prescribed capital amount as approved by APRA
Item 8
Report the value of any adjustments to the prescribed capital amount as approved by APRA.Report adjustments that would result in an increase to prescribed capital amount as a positive value.
9. Prescribed capital amount
Item 9
Prescribed capital amount is a derived item and is calculated as the sum of:item 1;item 2;item 3;item 4;item 5;item 7; anditem 8less:item 6.This is subject to the minimum value of $10 million for a life company.