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Financial Sector (Collection of Data) (reporting standard) determination No. 74 of 2023
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| H3 aggregate offset | H3 aggregate offset is the amount of potential reinsurance recoverables from aggregate reinsurance cover. The Level 2 insurance group must not allow for any reinstatements of aggregate reinsurance cover unless these have been contractually agreed with the reinsurer(s). If reinstatements are included, the cost of reinstatement must be netted from the offset. The Level 2 insurance group must agree with APRA a methodology for the determination of this adjustment.This methodology may allow for any portion of paid and outstanding claims and premiums liabilities (PL) that contribute to the Level 2 insurance group’s retained losses for the purposes of the retention on any aggregate reinsurance cover, provided it does not result in a double-count between this offset and the PL offset.The total H3 aggregate offset is calculated as the sum of:first event;second event; andthird event. |
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| H3 loss per event | The H3 loss per event is calculated for each H3 event as the sum of:single event loss from H3 event; andH3 reinstatement cost;less:H3 reinsurance recoverables;H3 aggregate offset; andH3 reinstatement premiums. |
| H3 reinstatement cost | The Level 2 insurance group is not required to determine a H3 reinstatement cost after the third event.H3 reinstatement cost is the cost (if any) of reinstating catastrophe reinsurance cover after the occurrence of the first two H3 losses. The cost (if any) must reflect the cost of reinstating reinsurance cover up to the size of the third event. In determining this cost, if the Level 2 insurance group does not have contractually agreed rates for the reinsurance cover, the Level 2 insurance group must estimate the cost based on the reinsurance market conditions that would prevail after the occurrence of the events. The amount must not be less than the full original cost of the cover, with no deduction for the expiry of time since the inception of the reinsurance arrangements unless the Level 2 insurance group is able to demonstrate to APRA that the amount materially overstates the cost that would prevail in the market after the occurrence of the events.The total H3 reinstatement cost is calculated as the sum of:first event; andsecond event. |
| H3 reinstatement premiums | H3 reinstatement premiums are applicable to Level 2 insurance groups that write reinsurance and may receive inwards reinstatement premiums from cedants as a result of the events that give rise to three H3 losses. H3 reinstatement premiums must only be included in NP HR if the reinsurance contract specifically stipulates that offsetting with the cedant will occur at the time of the payment of the reinsurance claim.The total H3 reinstatement premiums is calculated as the sum of:first event;second event; andthird event. |