Subdivision Intra-group capital transactions[12] - Insurance (prudential standard) determination No. 3 of 2011 - Prudential Standard GPS 111 - Capital Adequacy: Level 2 Insurance Groups - Intra-group capital transactions[12]

Intra-group capital transactions[12]

APRA may require the parent entity of a Level 2 insurance group to exclude from the group’s capital base any component of capital which APRA has reasonable grounds to believe does not represent a genuine contribution to the financial strength of the Level 2 insurance group. The matters APRA may consider in assessing whether a component of capital does not represent a genuine contribution to financial strength include, but are not limited to, whether a component of capital:

(a) is clearly supplied from debt raised from other group members;

(b) results from intra-group transactions with no economic substance;

(c) is contributed by a member of the group using funding sourced, directly or indirectly, from the recipient group member; or

(d) is contributed by a group member and the funding of which contains cross-default clauses that would be triggered as a result of the recipient group member failing to meet any servicing obligations.

In assessing the overall capital strength of a Level 2 insurance group, APRA will have regard to the ability of the parent entity to readily transfer capital from entities within the consolidated Level 2 insurance group should the need arise to recapitalise the parent entity or any group entity. In the event that capital support from within the group is not available, APRA may require the parent entity of the Level 2 insurance group to adjust its MCR to reflect the lack of available capital.
The parent entity of a Level 2 insurance group, in measuring the group’s capital, must exclude any instrument issued by an entity in the Level 2 insurance group where that instrument is guaranteed by another member of the group. This does not apply to guarantees of capital issued by Special Purpose Vehicles (SPVs) in accordance with the requirements of GPS 112.[13]
In assessing the overall capital strength of a Level 2 insurance group, APRA may request that the parent entity provide APRA with details of the group’s intra-group exposures, including capital transactions and intra-group guarantees. The information on intra-group exposures would typically include details of all intra-group exposures provided by the parent entity to the Level 2 insurance group. APRA may also request details of material exposures between entities controlled by the parent entity.

Intra-group capital transactions[12]Intra-group capital transactions[12]

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Intra-group capital transactions[12]