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Insurance (prudential standard) determination No. 15 of 2008 - Prudential Standard GPS 111 - Capital Adequacy: Level 2 Insurance Groups
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Turn the raw legal text into a practical explanation grounded in Insurance (prudential standard) determination No. 15 of 2008 - Prudential Standard GPS 111 - Capital Adequacy: Level 2 Insurance Groups.
The Insurance Risk Capital Charge relates to the risk that the actual value of net insurance liabilities is greater than the value determined according to Prudential Standard GPS 311 Audit and Actuarial Reporting and Valuation: Level 2 Insurance Groups (GPS 311). The method for determining the Insurance Risk Capital Charge is set out in GPS 115.
This capital charge has two components: a charge in respect of outstanding claims risk (Outstanding Claims Capital Charge); and a charge in respect of premiums liability risk (Premiums Liability Capital Charge). Outstanding Claims Capital Charge and Premiums Liability Capital Charge are as defined in GPS 110, except that references to Prudential Standard GPS 310 Audit and Actuarial Reporting and Valuation (GPS 310) are to be read as references to GPS 311 in the context of a Level 2 insurance group.
If a Level 2 insurance group securitises insurance liabilities, the net insurance liabilities may reduce. The Level 2 insurance group must consult APRA prior to entering into a material securitisation transaction in order to be able to assess the Insurance Risk Capital Charge and the Concentration Risk Capital Charge.[5]