Insurance Act 1973 - Determination of Prudential Standards - GPS 110 - Capital Adequacy for General Insurers; GPS 120 - Assets in Australia for General Insurers; GPS 210 - Liability Valuation for General Insurers; GPS 220 - Risk Management for General Insurers; GSP 230 - Reinsurance Arrangements for General Insurers; GPS 410 - Transfer and Amalgamation of Insurance Business for General Insurers and Transitional Prudential Standard GPS 900- Early Approvals of Auditors and Actuaries (07/02/2002)
Capital BaseCapital Base
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Turn the raw legal text into a practical explanation grounded in Insurance Act 1973 - Determination of Prudential Standards - GPS 110 - Capital Adequacy for General Insurers; GPS 120 - Assets in Australia for General Insurers; GPS 210 - Liability Valuation for General Insurers; GPS 220 - Risk Management for General Insurers; GSP 230 - Reinsurance Arrangements for General Insurers; GPS 410 - Transfer and Amalgamation of Insurance Business for General Insurers and Transitional Prudential Standard GPS 900- Early Approvals of Auditors and Actuaries (07/02/2002).
Capital Base
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Capital, for supervisory purposes, is considered in two tiers. Tier 1, or core capital, comprises the highest quality capital elements that fully meet all the essential characteristics of capital described in paragraph 3 of GPS 110. Tier 2, or supplementary capital, includes other instruments that, to varying degrees, fall short of the quality of Tier 1 capital but nonetheless contribute to the overall financial strength of an insurer.
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A locally-incorporated insurer’s capital base is defined as the sum of Tier 1 and Tier 2 capital, less the deductions specified below. An insurer must ensure that its capital base exceeds its MCR, as defined under GPS 110, at all times. An example illustrating the calculation of an insurer’s capital base is included as Attachment 1.