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Turn the raw legal text into a practical explanation grounded in Financial Sector (Collection of Data) (reporting standard) determination No. 118 of 2023.

Reporting Standard LRS 117.0

Asset Concentration Risk Charge

General instructions

Reporting tables

Tables in these instructions 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.

Any specific combination of values in the table must not appear on more than one row in that table when reported.

Definitions

Terms highlighted in bold italics indicate that the definition is provided in these instructions.

Asset Concentration Risk Charge (ACRC)	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 LPS 117.
ACRC for aggregate offshore reinsurance asset exposure	This is the excess (if any) of the net exposure amount for offshore reinsurance asset exposures over and above the aggregate limit specified in paragraph 3 of Attachment A to LPS 117.
ACRC for individual asset exposure	This is the excess (if any) of the net exposure amount for an individual asset or credit exposure over and above the respective asset concentration limit specified in paragraph 1 of Attachment A of LPS 117.
ACRC aggregate limit for offshore reinsurance asset exposure	This is the aggregate limit for offshore reinsurance asset exposures specified in paragraph 3 of Attachment A to LPS 117.The aggregate limit applies across all reinsurance arrangements which are not with a registered life company or appropriate retrocessionaire. Life companies must apportion the aggregate limit across all such arrangements in proportion to the exposure amounts being assessed against the aggregate limit.
ACRC limit for individual asset exposure after cumulative exposure adjustment	This is the individual asset or credit exposure asset concentration limit specified in paragraph 1 of Attachment A to LPS 117, reduced for cumulative exposures to the same counterparty or related counterparties in respect of all asset classes with lower limits.

Counterparty grade 1, 2 or 3 before downgrade	This is an indicator that identifies whether the reinsurance counterparty had a counterparty grade 1, 2 or 3 at the time that the reinsurance arrangement was entered into. This relates to reinsurance arrangements with a registered life company, an APRA approved affiliated entity or an appropriate retrocessionaire where LPS 117 specifies a phased reduction in the asset concentration limit in the event of the reinsurance counterparty being downgraded below grade 3.Possible values are:yes;no; andnot applicable.
Counterparty group name	For each counterparty entity to which the life company has exposure, this is the registered business name of the corporate group to which the counterparty entity belongs.Where the counterparty entity does not belong to a group, it is the counterparty name.
Counterparty name	This is the registered business name of the counterparty entity to which the life company has exposure.
Current counterparty grade	This is the counterparty grade of the asset or counterparty to which the life company has exposure. The counterparty grade must be determined in accordance with LPS 001 as at the reporting date.

Exposure amount assessed against individual ACRC limit	This is the amount of on-balance sheet or off-balance sheet exposure which is assessed against ACRC limit for individual asset exposure after cumulative exposure.For exposures to reinsurance assets it is the stressed value of the reinsurance asset, net of any regulatory adjustments to capital base related to the exposure, less the sum of:adjustment for exposure to eligible collateral items;adjustment for exposure to guarantor; andadjustment for other arrangement.For non-reinsurance assets it is the fair value of the non-reinsurance asset, net of any regulatory adjustments to capital base related to the exposure, less the sum of:adjustment for exposure to eligible collateral items;adjustment for exposure to guarantor; andadjustment for other arrangement.For eligible collateral, exposures to a guarantor or other types of risk mitigant that APRA recognises in place of an underlying asset, it is the amount recognised by APRA.
Exposure amount assessed against aggregate ACRC limit	This is the amount of exposure which is assessed against ACRC aggregate limit for offshore reinsurance asset exposure.For reinsurance arrangements that are not with a registered life company or appropriate retrocessionaire, it is the exposure amount assessed against individual ACRC limit subject to a maximum of ACRC limit for individual asset exposure after cumulative exposure adjustment.
Exposure category	This is the category of exposure. Possible exposure categories are:underlying asset;eligible collateral item (this would apply if the asset is an eligible collateral item that is being recognised in place of the underlying non-reinsurance or reinsurance asset);exposure to guarantor (this would apply if the item is an exposure to a guarantor or issuer of a letter of credit that is being recognised in place of the underlying non-reinsurance or reinsurance asset); andother (this would apply for another type of risk mitigant asset or exposure that APRA recognises in place of the underlying non-reinsurance or reinsurance asset).
Exposure description	This is brief description of the exposure in question which provides additional information to help APRA to better understand the exposure. For example, this would allow APRA to understand multiple exposures which may be classified under the same exposure type with the same counterparty.
Exposure type	This is the type of exposure. Possible exposure types are outlined in Appendix A.

Exposure amount assessed against individual ACRC limit

This is the amount of on-balance sheet or off-balance sheet exposure which is assessed against ACRC limit for individual asset exposure after cumulative exposure.For exposures to reinsurance assets it is the stressed value of the reinsurance asset, net of any regulatory adjustments to capital base related to the exposure, less the sum of:adjustment for exposure to eligible collateral items;adjustment for exposure to guarantor; andadjustment for other arrangement.For non-reinsurance assets it is the fair value of the non-reinsurance asset, net of any regulatory adjustments to capital base related to the exposure, less the sum of:adjustment for exposure to eligible collateral items;adjustment for exposure to guarantor; andadjustment for other arrangement.For eligible collateral, exposures to a guarantor or other types of risk mitigant that APRA recognises in place of an underlying asset, it is the amount recognised by APRA.

Exposure amount assessed against aggregate ACRC limit

This is the amount of exposure which is assessed against ACRC aggregate limit for offshore reinsurance asset exposure.For reinsurance arrangements that are not with a registered life company or appropriate retrocessionaire, it is the exposure amount assessed against individual ACRC limit subject to a maximum of ACRC limit for individual asset exposure after cumulative exposure adjustment.

Exposure category

This is the category of exposure. Possible exposure categories are:underlying asset;eligible collateral item (this would apply if the asset is an eligible collateral item that is being recognised in place of the underlying non-reinsurance or reinsurance asset);exposure to guarantor (this would apply if the item is an exposure to a guarantor or issuer of a letter of credit that is being recognised in place of the underlying non-reinsurance or reinsurance asset); andother (this would apply for another type of risk mitigant asset or exposure that APRA recognises in place of the underlying non-reinsurance or reinsurance asset).

Exposure description

This is brief description of the exposure in question which provides additional information to help APRA to better understand the exposure. For example, this would allow APRA to understand multiple exposures which may be classified under the same exposure type with the same counterparty.

Exposure type

This is the type of exposure. Possible exposure types are outlined in Appendix A.

Offshore reinsurance premium ratio for group risk business	This is the ratio of notional offshore reinsurance premium for group risk business relating to a particular reinsurance arrangement to total gross premium expense for group risk business for the statutory fund. This reflects the proportion of group risk business risks that is being ceded offshore.
Offshore reinsurance premium ratio for individual risk business	This is the ratio of notional offshore reinsurance premium for individual risk business relating to a particular reinsurance arrangement to total gross premium expense for individual risk business for the total statutory fund. This reflects the proportion of individual risk business risks that is being ceded offshore.
On-balance sheet / off-balance sheet	This is to identify whether an exposure is on balance sheet or off balance sheet. Possible values are:on-balance sheet; andoff-balance sheet.