Insurance (prudential standard) determination No. 1 of 2010 - Prudential Standard GPS 116 - Capital Adequacy - Concentration Risk Capital Charge
Objective and key requirements of this PObjective and key requirements of this Prudential Standard
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Objective and key requirements of this Prudential Standard
This Prudential Standard sets out the calculation of the Concentration Risk Capital Charge under the Prescribed Method of calculating the Minimum Capital Requirement applicable to a general insurer. There are specific requirements for this calculation for lenders mortgage insurers.
The Concentration Risk Capital Charge is the component of the Minimum Capital Requirement that takes into account the highest aggregation of risks of an insurer. It is calculated as the addition of the insurer’s Maximum Event Retention after taking into account acceptable reinsurance arrangements, plus the cost of one reinstatement of those reinsurance arrangements. This Prudential Standard sets out issues that affect an insurer’s Maximum Event Retention that must be taken into account in the calculation of the Maximum Event Retention and therefore the Concentration Risk Capital Charge.
This Prudential Standard forms part of a comprehensive set of prudential standards that deal with the measurement of a general insurer’s capital adequacy.