Objective and key requirements of this PObjective and key requirements of this Prudential Standard

Objective and key requirements of this Prudential Standard

The primary purpose of this Prudential Standard is to specify certain assets that are excluded as “assets in Australia” for the purposes of section 28 of the Insurance Act 1973. The assets excluded are those which would otherwise fall within the definition of “assets in Australia” but which APRA considers to have doubtful or no value to policyholders in Australia in the event of a general insurer becoming insolvent.

Section 28 requires all general insurers to maintain assets in Australia (excluding goodwill and other amounts excluded by this Prudential Standard) of a value that equals or exceeds the total amount of the general insurer’s liabilities in Australia. This requirement is designed to ensure that the total value of assets held within the jurisdictional reach of APRA and the Australian courts is sufficient to meet a general insurer’s liabilities in Australia.

Prudential Standard GPS 110 Capital Adequacy requires that a foreign general insurer operating in Australia as a branch maintain assets in Australia, in excess of its liabilities in Australia, of an amount at least equal to its Minimum Capital Requirement. For the Minimum Capital Requirement, refer to Prudential Standard GPS 110 Capital Adequacy.

This Prudential Standard includes the ability for APRA to agree to limited transition arrangements. These provisions are set out in Attachment A.