Financial Condition ReportFinancial Condition Report

Financial Condition Report

11. A life company must arrange for its Appointed Actuary to:

(a) investigate the financial condition as at the end of the financial year of the company of:

(i) each of its statutory funds;
(ii) the general fund; and
(iii) the company as a whole; and

(b) give the company a written report of the results of the investigation.

12. The investigation required under paragraph 11 must be carried out with regard to all the prudential requirements applicable to the life company and include:

(a) advice to the life company regarding the valuation of the life company’s policy liabilities, and the calculation of the capital base and prescribed capital amount as described in paragraph 22;

(b) an assessment of whether, over the financial year concerned, the life company has had in place systems and processes to ensure that the payment of surrender values results in payment of at least the amount calculated under Prudential Standard LPS 360 Termination Values, Minimum Surrender Values and Paid-up Values and that the requirements in respect of paid-up values have been complied with[5];

(c) an assessment of the cost of any investment performance guarantees within the meaning of Prudential Standard LPS 370 Cost of Investment Performance Guarantees and whether the life company has complied with that Prudential Standard in respect of each relevant statutory fund during the financial year concerned;

(d) an assessment, in relation to:

(i) each statutory fund;

(ii) the general fund; and

(iii) the life company as a whole

of the extent to which the life company has complied, during the financial year concerned, with:

(iv) the requirements of the capital adequacy standards; and

(v) any directions[6] or conditions of registration[7] applicable to the life company under the Act;

(e) an assessment of the life company’s Internal Capital Adequacy Assessment Process; and

(f) an assessment of the suitability and adequacy of the risk management framework as required under Prudential Standard LPS 220 Risk Management.

13. To avoid doubt, if the life company is an Eligible Foreign Life Insurance Company, the investigation need not cover the financial condition of the company to the extent that the financial condition relates to life insurance business carried on outside Australia by the company.[8]

14. Nothing in this Prudential Standard prevents a life company from having its Appointed Actuary also investigate the financial condition of the company as at a time other than the end of a financial year.