Insurance (prudential standard) determination No. 7 of 2006 - Prudential Standard GPS 110 - Capital Adequacy
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Where an insurer possesses recognised collateral against an asset, it may apply the Investment Capital Factor relevant to the collateral to the value of the asset (instead of applying the capital factor that would otherwise apply to the asset). Collateral will be recognised only to the extent that it takes the form of a charge, mortgage or other security interest in, or over, an Eligible Collateral Item. Eligible Collateral Items are cash, Government securities, or debt obligations (as defined in paragraph 5 of this Attachment) where the obligor has a counterparty rating in Grade 1, 2 or 3. The Eligible Collateral Item must also be held for the period for which the asset is held. Where the fair value of the collateral does not cover the full value of the asset, only that part of an asset that is covered by collateral may be assigned the Investment Capital Factor applicable to the collateral.