Objective and key requirements of this PObjective and key requirements of this Prudential Standard

Objective and key requirements of this Prudential Standard

This Prudential Standard aims to ensure that general insurers maintain adequate capital to act as a buffer against the risks associated with their activities.

This Prudential Standard outlines the overall framework adopted by APRA for assessing the capital adequacy of a general insurer.

The key requirements of this Prudential Standard are that a general insurer must:

• maintain minimum levels of capital determined according to the Internal Model Based Method or the Prescribed Method;
• determine its Minimum Capital Requirement having regard to a range of risk factors that may threaten its ability to meet policyholder obligations. Under the Prescribed Method, these are insurance risk, investment risk and concentration risk. A general insurer using the Internal Model Based Method will be expected to include at least these risks, but also all other relevant risk factors, within its method of calculation;
• make certain public disclosures about its capital adequacy position; and
• seek APRA’s consent for reductions in capital.

This Prudential Standard forms part of a comprehensive set of prudential standards that deal with the measurement of a general insurer’s capital adequacy.