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Financial Sector (Collection of Data) (reporting standard) determination No. 59 of 2023

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Adjustments to prescribed capital amount as approved by APRA	These are adjustments made to an insurer’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 reporting insurer, or a reporting insurer has used inappropriate judgement or estimation in calculating the prescribed capital amount.Approved adjustments are to be reported separately in the Reporting Standard GRS 111.0 Adjustments and Exclusions highlighting the description of the adjustment given, transitional status and amount of adjustment applied. An increase in the risk charge is to be reported as a positive amount.
Aggregation benefit	The aggregation benefit makes an explicit allowance for diversification between asset risk and the sum of insurance risk and insurance concentration risk in the calculation of the prescribed capital amount.This must be determined in accordance with GPS 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 reporting insurer’s capital base.This must be determined in accordance with Prudential Standard GPS 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 a reporting insurer’s capital base due to credit or market risks.This must be determined in accordance with Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge (GPS 114).
Asset Risk Charge - aggregated risk charge component	A regulated institution must calculate the risk charge components, as defined in GPS 114, by considering the impact on the capital base of the regulated institution of a range of stresses. These risk charge components are then aggregated using the formula set out in GPS 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 GPS 114.This item must be calculated as the sum of the risk charge components less the Asset Risk Charge - aggregated risk charge component.

Division A - Financial Sector (Collection of Data) (reporting standard) determination No. 59 of 2023 - A | Zoe

Insurance Concentration Risk Charge

The Insurance Concentration Risk Charge is the minimum amount of capital required to be held against insurance concentration risks. The Insurance Concentration Risk Charge relates to the risk of an adverse movement in the reporting insurer's capital base due to a single large loss or series of losses.This must be determined in accordance with Prudential Standard GPS 116 Capital Adequacy: Insurance Concentration Risk Charge.

Insurance Risk Charge

The Insurance Risk Charge is the minimum amount of capital required to be held against insurance risks determined in accordance with Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115). The Insurance Risk Charge relates to the risk that the value of net insurance liabilities determined in accordance with Prudential Standard GPS 340 Insurance Liability Valuation (GPS 340) is insufficient to cover associated net claim payments and associated claim expenses as they fall due.This must be calculated as the sum of:Total OCL Insurance Risk Charge; andTotal PL Insurance Risk Charge.

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 GPS 118 Capital Adequacy: Operational Risk Charge (GPS 118).
Operational Risk Charge for inwards reinsurance business (ORCI)	This is the Operational Risk Charge relating to the reporting insurer's inwards reinsurance business. This must be calculated using the formula in accordance with GPS 118.
Operational Risk Charge for business that is not inwards reinsurance (ORCNI)	This is the Operational Risk Charge relating to business written directly by the reporting insurer. This must be calculated using the formula in accordance with GPS 118.

Prescribed capital amount

The prescribed capital amount must be determined in accordance with GPS 110.It is calculated as the sum of:Insurance Risk Charge;Insurance Concentration Risk Charge;Asset Risk Charge;Asset Concentration Risk Charge;Operational Risk Charge; andadjustments to prescribed capital amount as approved by APRA;less:aggregation benefit.Where the reporting insurer is a Category D or E insurer, the prescribed capital amount is subject to a minimum of $2 million. For all other reporting insurers, the prescribed capital amount is subject to a minimum of $5 million.

Risk charge components	The risk charge components, have the same meaning as in, and must be calculated in accordance with, GPS 114. These are calculated by determining the fall in the capital base of the regulated institution in seven stress tests.

Total OCL Insurance Risk Charge

The risk charge for outstanding claims risk relates to the risk that the value of net outstanding claims liabilities (OCL) determined in accordance with GPS 340 will be insufficient to cover associated net claim payments and any associated claim expenses as they fall due.This must be determined in accordance with GPS 115.

Total PL Insurance Risk Charge

This is the Insurance Risk Charge in respect of premiums liability (PL) risk, which relates to the risk that the value of the net PL is greater than the value determined in accordance with GPS 340. It also relates to the risk that material net written premium, as defined in GPS 115, will be insufficient to fund the liabilities arising from that business.This must be determined in accordance with GPS 115.