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 requires a general insurer or Level 2 insurance group to maintain adequate capital against the risks associated with its activities.

The ultimate responsibility for the prudent management of capital of a general insurer or Level 2 insurance group rests with its Board of directors. The Board must ensure that the general insurer or Level 2 insurance group maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances.

The key requirements of this Prudential Standard are that a general insurer or Level 2 insurance group must:

• have an Internal Capital Adequacy Assessment Process;
• maintain required levels of capital;
• determine its prescribed capital amount having regard to a range of risk factors that may adversely impact a general insurer or Level 2 insurance group’s ability to meet its obligations. These factors include insurance risk, insurance concentration risk, asset risk, asset concentration risk and operational risk;
• comply with any supervisory adjustment to capital imposed by APRA;
• make certain public disclosures about the capital adequacy position of the general insurer or Level 2 insurance group;
• seek APRA’s consent for certain planned capital reductions of the general insurer or Level 2 insurance group; and
• inform APRA of any significant adverse changes in the general insurer or Level 2 insurance group’s capital position.