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

Objective and key requirements of this Prudential Standard

This Prudential Standard specifies certain assets that are excluded from being treated as ‘assets in Australia’ by a general insurer for the purposes of section 28 of the Insurance Act 1973.

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 (other than its pre-authorisation liabilities). 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 for the purposes of subsection 116(3) of the Insurance Act 1973.

Prudential Standard GPS 110 Capital Adequacy also requires that a Category C insurer operating in Australia as a branch maintains assets in Australia that exceed its liabilities in Australia by an amount that is greater than its Prudential Capital Requirement.

The assets that this Prudential Standard excludes from being treated as ‘assets in Australia’ are those that may not be treated by a court as falling within the definition of ‘assets in Australia’, or that APRA considers may have doubtful or no value to policyholders in Australia in the event of a general insurer becoming insolvent.