Insurance (prudential standard) determination No. 4 of 2008 - Prudential Standard GPS 114 Capital Adequacy: Investment Risk Capital Charge
Objective and key requirements of this PObjective and key requirements of this Prudential Standard
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Objective and key requirements of this Prudential Standard
This Prudential Standard sets out the calculation of the Investment Risk Capital Charge under the Prescribed Method of calculating the Minimum Capital Requirement applicable to a general insurer. Credit risk, market or mismatch risk and liquidity risk may all cause adverse movements in the value of assets recorded by a general insurer or may cause adverse movements in certain off-balance sheet exposures. The Investment Risk Capital Charge attempts to cover these risks by requiring general insurers to hold an amount of capital against each asset that is proportional to the value of that asset. The Prescribed Method of calculating the Investment Risk Capital Charge is carried out using a simple approach of applying a factor to the value of an asset or off-balance sheet exposure. The factors that apply to particular assets or exposures are set out at Attachment A.
This Prudential Standard forms part of a comprehensive set of prudential standards that deal with the measurement of a general insurer’s capital adequacy.