Insurance (prudential standard) determination No. 3 of 2019
Application and review processApplication and review process
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Application and review process
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A regulated institution wishing to apply for approval to use the IMB Method must consult with APRA at an early stage. To assist APRA in assessing the readiness of a regulated institution to commence the approval process, APRA has developed a series of self-assessment indicators which are set out in Attachment A.
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APRA will consider a regulated institution’s self-assessment without seeking evidence or verification (which occurs later in the application and assessment process). If the self-assessment reveals major deficiencies, APRA will advise the regulated institution of further progress that is needed before the regulated institution continues with the application seeking approval to use the IMB Method.
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APRA’s approval to use the IMB Method to determine the prescribed capital amount will be subject to a comprehensive model review process including:
(a) submission by the regulated institution of a detailed application for approval, with comprehensive information about the ECM and RCM, its governance and use, and the risk management environment of the regulated institution; and
(b) one or more on-site visits by APRA to the regulated institution to discuss the detail of the ECM and RCM, risk management systems, and surrounding governance and organisational structure and controls.
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If it is satisfied that the criteria specified in this Prudential Standard have been met, APRA will approve the use of the IMB Method and consequently the RCM to determine the regulated institution’s prescribed capital amount. Approval is given by APRA modifying relevant requirements in GPS 110 pursuant to section 32(3A) of the Act. Modification may include requirements to be met on a continuing basis, including specifying that the prescribed capital amount determined using the RCM will be subject to a minimum that is expressed as a percentage of the Standard Method calculation. During the first two years of the use of the IMB Method by a regulated institution, that minimum is to be 90 per cent of the amount determined using the Standard Method.
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Use of the IMB Method does not relieve a regulated institution from complying with the following aspects of the capital standards:
(a) measurement of capital requirements as detailed in Prudential Standard GPS 112 Capital Adequacy: Measurement of Capital, including:
(i) the eligibility of capital instruments;
(ii) regulatory adjustments to the capital base; and
(iii) the minimum levels set out with respect to the types of capital used;
(b) asset risk charges on reinsurance assets related to a non-APRA-authorised reinsurer under the default module as specified in Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge; and