The ultimate responsibility for the prudent management of capital of a life company rests with its Board of directors. The Board must ensure that the life company maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances.

The key requirements of this Prudential Standard are that a life company must:

• have an Internal Capital Adequacy Assessment Process;
• maintain required levels of capital within each of its funds and for the company as a whole;
• determine each fund’s prescribed capital amount having regard to a range of risk factors that may adversely impact the company’s ability to meet its obligations. These factors include insurance risk, asset risk, asset concentration risk and operational risk;
• comply with any supervisory adjustment to capital imposed by APRA;
• make certain public disclosures about the capital adequacy position of each fund and the company as a whole;
• seek APRA’s consent for certain planned capital reductions of the company; and
• inform APRA of any significant adverse changes in the capital position of the company as a whole or any of its funds.