Insurance (prudential standard) determination No. 7 of 2006 - Prudential Standard GPS 110 - Capital Adequacy
Tier 1 capitalTier 1 capital
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Tier 1 capital
(a) Prior to 1 January 2008, Residual Tier 1 capital is limited to 20 per cent of total Tier 1 capital, before deductions. Any excess amount is counted as Upper Tier 2 capital;
(b) On and after 1 January 2008:
(i) Fundamental Tier 1 capital must constitute at least 75 per cent of net Tier 1 capital, defined as the sum of Fundamental Tier 1 and Residual Tier 1 capital less Tier 1 deductions. This requirement does not apply to mutually owned insurers in their formative years of operation, as approved by APRA;
(ii) Residual Tier 1 capital is limited to 25 per cent of net Tier 1 capital. Any excess amount is counted as Upper Tier 2 capital;
(iii) Innovative Tier 1 capital is limited to 15 per cent of net Tier 1 capital, except for insurers that are subject to APRA-approved transition arrangements (refer to paragraph 7 of Attachment H). Any excess amount is counted as Upper Tier 2 capital;
(c) Net Tier 1 capital must constitute at least 50 per cent of an insurer’s required capital base. This requirement does not apply to mutually owned insurers in their formative years of operation, as approved by APRA;