Termination value: The Standard defines the termination value of a policy before adjustments as the greater of (a) the amount that would be paid on the basis used in practice from time to time in the event of voluntary termination, having regard to policy documentation, promotional material and reasonable expectations of policy owners based on current practice; and (b) the minimum termination value prescribed in the Standard (para 9). The following adjustments then apply to ensure consistency with fair values and liability floors, including for investment-linked policies (unit prices consistent with fair values, para 10(a)), incurred claims and unexpired risk floors (para 10(b)), present value treatment for deferred or instalment payments (para 10(c)), and a risk-free best-estimate liability floor for annuity, fixed term/rate or funeral bond business (para 10(d)). The discounting basis is the risk-free discount rate, with an added illiquidity premium if that premium is used in the risk-free best estimate liability (para 11).

Minimum termination value by business type: The Standard adopts a categorical approach. Funeral bond business and risk business that is not long-term risk business have minimum termination values equal to zero (paras 12-13). Unbundled investment business uses a formula reflecting starting amount, premiums paid, credited “normal investment earnings”, and specified deductions for normal ongoing charges and other charges, with further detailed definitions (paras 14-23). Traditional business and long-term risk business must use prescribed methods in Attachment 2 with parameters in Attachment 1 (paras 24-27), and the method selected at issue cannot be changed after the policy is issued (para 27). Immediate annuities and fixed term/rate business have bespoke rules that depend on the annuity structure (paras 28-37 and Attachment 1 Part V).

Minimum surrender values: The minimum surrender value is the lowest amount a company must pay to a policy owner on surrender (para 38). Friendly societies have no minimum surrender value (para 39). For other life companies, certain exclusions remove the requirement for a minimum surrender value (policies issued prior to 1 July 1995 with specified disclosure, regular premium business in force less than three years, overseas, wholesale and reinsurance business; para 40). For policies not excluded, the minimum surrender value is the minimum termination value and the company must be able to demonstrate that payments made are not less than that amount less any debt secured by the policy (paras 41-42).

Minimum paid-up values: The Standard sets a zero floor for policies with no minimum surrender value (para 43) and for friendly society policies (para 44). For other life companies a choice is permitted on secured debt treatment (retain or extinguish debt, para 45). Traditional and long-term risk business paid-up values are determined at the date just before the unpaid premium and calculated using Attachment 2 methods (paras 46-48). For unbundled investment business, the paid-up value at the date of becoming paid-up is the greater of any contractual minimum paid-up value and the minimum termination value, with subsequent adjustments allowed for ongoing charges and policy transactions (paras 49-50).

Prescribed parameters and transitions: Attachment 1 lists prescribed parameters. It treats certain inputs as PRE or POST relative to the 1 July 2000 tax-change cutoff (Attachment 1, pts 1-2). Attachment 1 Part I prescribes fixed dollar charges (indexed to CPI, note), Part II prescribes charge percentages for unbundled investment business, Part III sets interest and mortality assumptions for traditional business (interest 4.0% for paid-up, 4.5% for termination; mortality A1924-29), Part IV provides an alternative basis for traditional business issued after commencement with CB Rate linkage and Sprague adjustments, and Part V sets interest bases for immediate annuities and fixed term/rate business. Attachments 2 and 3 provide the algebraic formulae and operational steps for calculating termination and paid-up values across the covered policy classes.

Administrative rules: Life companies must obtain written APRA approval for methods of calculating minimum termination/surrender/paid-up values if the policy does not belong to any of the types in the Standard (para 8). APRA has power to adjust or exclude specific requirements for a life company (para 51). Determinations or exercises of discretion under prior versions continue to have effect (para 52).

This Standard explicitly applies to all life companies registered under the Life Insurance Act 1995, including friendly societies (Application, para 2). It also applies to an Eligible Foreign Life Insurance Company, but only to the business carried on through its Australian statutory funds (Application, para 3). The Schedule contains different rules and numeric parameters that make the Standard directly applicable to:

• Life companies other than friendly societies, for whom most of the detailed calculation methods, parameter choices and numerical floors are targeted (for example, Attachment 1 Part III and Attachment 2 for traditional business, paras 24-27, 46-48).
• Friendly societies, for which the Standard makes specific concessional provisions: starting amounts for unbundled investment business are based on the “normal contractual minimum value” at commencement (para 18), minimum termination values for traditional and long-term risk business issued prior to the date of commencement are zero (para 24), minimum surrender values are nil (para 39), and the minimum paid-up value for friendly societies is zero (para 44).
• Policy owners, who receive protection in the form of prescribed minimum termination, surrender and paid-up values in many circumstances (paras 9, 38, 43). The Standard also recognises situations where policy documentation or promotional material can legitimately create expectations that permit lower surrender entitlements, for example where a policy issued prior to 1 July 1995 had no regulated minimum surrender value and the policy document clearly disclosed non-availability of surrender (para 40(a)(i)-(iii)).
• Actuaries and risk officers in life companies, who must implement prescribed calculation methodologies and specified parameter inputs, including mortality tables (Attachment 1 Part III), interest bases (Attachment 1 Parts III-V), Sprague adjustments and factors (Attachment 1 Part IV), and the algebraic methods in Attachment 2 and variations in Attachment 3.
• Compliance, finance and capital-modelling teams, because termination values are used in determining the capital base and statutory funds (Objective and key requirements), and because termination values must be demonstrably consistent with unit asset fair values for investment-linked policies (para 10(a)) and with present-value liability measures in certain cases (paras 10-11).
• Companies issuing non-standard products, who must obtain prior written approval from APRA for the method of calculating minimum termination/surrender/paid-up values if their policy does not belong to any of the types described (para 8). APRA may also adjust or exclude specific requirements by written notice to a life company (para 51), meaning multinational or novel product lines may be subject to entity-specific regulatory variation.

The Standard therefore imposes obligations both on life companies directly for calculation and documentation, and indirectly on policy owners through the floor protections and the disclosures that determine whether exclusion from minimum surrender value applies (para 40(a)(iii)). It also affects capital management because of the linkage to capital base calculations noted in the Objective. Operationally, the Standard impacts actuarial methodology selection, product design rules (for example, requirement that contractually increased premiums be treated as separate policies for unbundled business, para 15), and recordkeeping to demonstrate adherence to the minimums and exclusions (para 42).

Obligations to calculate termination values consistent with methods and floors: A life company must calculate termination values of policies using the methods prescribed in the Standard and ensure termination values are not less than minimum termination values prescribed (Objective and para 9). Where the company’s practice would pay more, the company must honour the greater amount (para 9(a)-(b)). For investment-linked policies the unit prices used to determine termination value must be consistent with the fair values of the assets backing the policy (para 10(a)). For some products the termination value cannot be less than specific liability floors, for example the discounted present value of incurred claims plus unexpired risks (para 10(b)), and the risk-free best estimate liability for annuities and fixed term/rate business (para 10(d)).

Discounting and rate inputs: The discount rate used for present-value floors is the risk-free discount rate, with addition of an illiquidity premium if the latter is used in determining the risk-free best estimate liability (para 11). Attachment 1 prescribes specific interest rates for different classes and for paid-up versus termination valuations (Attachment 1 Part III), and provides an alternative CB Rate linked basis for new traditional business (Attachment 1 Part IV).

Minimum surrender value payments: Where a policy owner requests surrender, the life company must pay at least the minimum surrender value (para 38). For policies where a minimum surrender value is required, the life company must be able to demonstrate that amounts paid are not less than the minimum surrender value, less any debt secured by the policy (para 42). The Standard also lists exclusions where no minimum surrender value applies (para 40).

Paid-up policy treatment: The Standard prescribes the minimum paid-up value in various situations. For policies with no minimum surrender value, the minimum paid-up value is zero (para 43). Friendly societies are given a zero paid-up floor for their policies (para 44). Life companies other than friendly societies may choose to retain a debt secured by a policy against its paid-up value, or extinguish it and reduce the paid-up amount accordingly (para 45). For traditional and long-term risk business the paid-up value is determined at the date immediately preceding the first unpaid premium and calculated using the prescribed methods (paras 46-48). For unbundled investment business the paid-up value at the date of becoming paid-up is the greater of any contractual minimum paid-up value and the minimum termination value (para 49), with subsequent allowance for ongoing charges and investment earnings (para 50).

Approval, continuity and APRA discretion: A life company must seek APRA’s written approval for a calculation method before issuing a policy that does not fit the types in the Standard (para 8). APRA may by written notice adjust or exclude a specific requirement in relation to a life company (para 51). Determinations or exercises of discretion under previous versions continue to have effect as if exercised under the current Standard (para 52).

Administrative rights and duties to demonstrate compliance: The Standard creates a demonstrable duty of proof. Paragraph 42 requires that a life company be able to demonstrate compliance that amounts paid on surrender are not less than the minimum. The Standard includes prescription of specific parameters and indexing rules, which effectively require systems to apply CPI indexing to fixed dollar charges (Attachment 1 Part I note), and to divide treatments between PRE and POST tax-change categories where relevant (Attachment 1 pts 1-2).

Transitional and definition duties: The Standard requires companies to apply the date-of-commencement definitions to determine starting amounts and applicable parameter regimes (Interpretation, para 7; paras 17-20). A life company must treat contractual increases in regular premiums as separate policies for unbundled business (para 15), and must use the purchased method for determination of a policy’s minimum termination value for the life of that policy (para 27).

The Standard itself specifies substantive prudential requirements and administrative processes, but does not in its text set out specific monetary penalties or criminal sanctions. The Authority clause expressly states the Standard is made under paragraph 230A(1)(a) of the Life Insurance Act 1995 (para 1), and compliance and enforcement regarding prudential standards sit within the enforcement architecture of the Life Insurance Act and APRA’s statutory powers, though the instrument does not reproduce those enforcement provisions. The Schedule does, however, create duties and evidentiary obligations whose breach would, in practice, expose a life company to APRA supervisory action under the Life Insurance Act framework.

Specific enforcement-relevant provisions in the Standard include:

• APRA approval and variation powers: Paragraph 8 requires APRA’s written approval for non-prescribed calculation methods before issuing a policy. Paragraph 51 permits APRA by written notice to adjust or exclude a specific requirement in relation to a life company. Both provisions give APRA administrative levers to require compliance or make entity-specific concessions, and thus are operational enforcement mechanisms for prudential conformity.
• Demonstration duty: Paragraph 42 requires the life company to be able to demonstrate that amounts paid to each policy owner who surrenders a policy are not less than the minimum surrender value, less any secured debt. That requirement creates an evidentiary burden which, if unmet, can form the basis for APRA action or supervisory questions.
• Continuity of prior determinations: Paragraph 52 preserves prior exercises of APRA discretion, which suggests that APRA’s historical waivers, approvals or directions remain binding under successor standards and can hence be relied upon or enforced.
• Prescription of method and immutability after issue: Paragraph 27 forbids changing the method used to determine minimum termination values after the policy is issued. This creates a compliance constraint and a potential enforcement trigger should a company alter methodologies mid-policy and thereby change policyholder entitlements.

The Standard does not specify specific dollar fines, criminal penalties or civil litigation mechanisms within its text. Life companies should therefore take note that enforcement will be through APRA’s supervisory and regulatory powers drawn from the Life Insurance Act 1995 and other relevant statutes and prudential standards, and that the Standard creates concrete operational obligations (calculation methods, recordkeeping, APRA approvals, demonstrable compliance) that will be the focus of APRA scrutiny.

Statutory basis and cross-references: The Standard is made under paragraph 230A(1)(a) of the Life Insurance Act 1995 (Authority, para 1). It interacts with other APRA prudential standards by reference, for example termination values are used in determining the capital base of a life company and its statutory funds, with a cross-reference to Attachment H of Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital (Objective and key requirements). The Schedule also references Prudential Standard LPS 340 Valuation of Policy Liabilities for the basis of expectation of life used in annuity calculations (para 29). These cross-references indicate that LPS 360 must be implemented in concert with capital adequacy rules and policy liability valuation standards.

Taxation timing and parameter PRE/POST rules: Attachment 1 distinguishes PRE and POST parameters to reflect the change in taxation arrangements for life insurance companies as at 1 July 2000 (Attachment 1 pts 1-2). The standard instructs “appropriate adjustment” when applying the Standard to overseas business where different taxation bases apply (Interpretation, para 6). These features create an interaction with taxation law and practice: the PRE/POST distinction and net-of-tax parameters embed tax assumptions into the prescribed parameters and calculation methodologies.

Interaction with policy documentation and consumer protection disclosures: Paragraph 9(a) expressly requires that the company have regard to amounts that the company is obliged to pay in accordance with the policy documentation and promotional material, and the reasonable expectations of policy owners based on current practice. Paragraph 40(a)(iii) provides that certain older policies face no minimum surrender value if the policy documentation and promotional material clearly disclose non-availability of surrender entitlement. Those provisions connect the Standard to the content of policy contracts and promotional statements, and therefore to legal duties arising from contract law, misrepresentation, and consumer protection obligations, although the Standard does not itself restate or discharge those broader legal obligations.

Continuity of prior APRA determinations and other prudential standards: Paragraph 52 preserves exercises of APRA’s discretion under prior versions, and names Prudential Standard LPS 4.02 Minimum Surrender Values and Paid-up Values as a previous version. This continuity has administrative significance for entities operating under prior waivers, approvals or directions. Implementers must reconcile prior APRA instruments with the current Standard to determine ongoing entitlements and constraints.

References to external actuarial tables and valuation standards: Attachment 1 Part III prescribes mortality assumptions referencing the A1924-29 Table and Attachment 1 Part IV references the IA 90-92 mortality table for the Institute of Actuaries of Australia. Paragraph 29 requires that the expectation of life be determined on the basis last adopted by the life company for the purposes of Prudential Standard LPS 340 Valuation of Policy Liabilities. These cross-references make the Standard operationally dependent on other actuarial standards and professional sources adopted by the company and recognised by APRA.

Regulatory perimeter: The Standard applies to life companies registered under the Act (Application, para 2) and to Eligible Foreign Life Insurance Companies but only in respect of business carried on through Australian statutory funds (Application, para 3). This delineation affects extraterritorial business and the application to foreign branches or parent-company liabilities. The Standard instructs appropriate adjustments when applied overseas (Interpretation, para 6), but otherwise restricts direct application to Australian statutory funds.

In sum, LPS 360 is intended to be read alongside the Life Insurance Act, other APRA prudential standards (notably LPS 112 and LPS 340), taxation rules affecting life insurance, and the content of policy documentation and promotional material. Implementers must coordinate actuarial and tax inputs, compliance documentation, and APRA approvals to ensure consistent cross-standard treatment.

Immediate instrument-level amendment: The top matter of the instrument records that Clare Gibney, a delegate of APRA, under subsection 230A(5) of the Life Insurance Act revokes Life Insurance (prudential standard) determination No. 13 of 2012, including Prudential Standard LPS 360 Termination Values, Minimum Surrender Values and Paid-up Values made under that Determination, and under subsection 230A(1) determines the new Prudential Standard LPS 360 in the Schedule (front matter). The instrument is dated 7 March 2023 and commences on 29 March 2023 (front matter).

Internal historical-computation dates: The Schedule contains multiple “date of commencement” references used for calculation and transitional purposes. Interpretation paragraph 7 defines the “date of commencement” for the Standard differently depending on the entity class: for friendly societies 30 June 2002, and for all other cases 30 June 1998 (para 7). However, the Application section states the Prudential Standard applies to life companies from 1 January 2013 (para 4), and the Schedule itself is being made effective by the instrument on 29 March 2023. These multiple dates reflect two purposes: the instrument’s effective date as a legal act (29 March 2023), the stated administrative application to life companies from 1 January 2013, and the arithmetic baseline dates used historically in the calculation rules. The text requires careful reading to determine which date of commencement or parameter regime applies to specific calculations, particularly the starting amount rules for unbundled investment business (paras 17-20) and the PRE/POST parameter split in Attachment 1 (Attachment 1 pts 1-2).

Parameter updates and indexing: Attachment 1 Part I prescribes fixed dollar charges and notes that the dollar amounts are those applying to calendar year 2012 and are to be indexed in line with the CPI published at 30 September of the immediately preceding year. That note indicates that the Standard anticipates indexed updates to the fixed-dollar charges rather than frequent textual amendments. Attachment 1 also distinguishes PRE and POST parameter regimes to reflect the taxation change as at 1 July 2000 (Attachment 1 pts 1-2). These parameter mechanisms embed a form of rolling update without textual amendment.

Reference to prior standards and continuity: Paragraph 52 provides that exercises of APRA’s discretion under a previous version continue to have effect, and identifies Prudential Standard LPS 4.02 Minimum Surrender Values and Paid-up Values as a previous version. The Standard thus preserves continuity in administrative decisions, waivers and approvals made under earlier instruments.

No further amendment history is recorded in the text. The instrument records revocation of the 2012 Determination and replacement by the new text. The Standard contains internal mechanisms (indexing and PRE/POST splits) to accommodate parameter evolution without textual amendment. APRA retains express discretion to adjust or exclude specific requirements for a life company (para 51), which effectively allows entity-specific departures from the Standard without instrument-level amendment.

The text of this Prudential Standard itself contains no references to litigation, judicial decisions or legal proceedings. It does not cite cases, nor does it record any court decisions or tribunals that have interpreted its provisions. Paragraph 52 preserves prior APRA exercises of discretion but does not record judicial review outcomes or other litigation.

The absence of litigation material in the instrument means that the Standard, as published in the Schedule, must be read and interpreted against the broader legislative and administrative framework (not reproduced here), and any disputes over interpretation, method, or APRA exercises of discretion would arise in the context of that broader framework. The Standard does, however, contain several provisions where interpretive disputes could logically arise, which are pertinent for lawyers and compliance professionals to note:

• Reasonable expectations standard, para 9(a): Termination values must reflect the “reasonable expectations of policy owners based on the company’s current practice.” That phrase can generate factual and legal debate about the company’s practice, the disclosure record and the policy owner’s legitimate expectations.
• Consistency with fair values for investment-linked unit prices, para 10(a): Determining whether unit prices are consistent with fair values of the assets backing a policy can require technical valuation evidence and may be contested.
• Application of liability floors, paras 10(b) and 10(d), and discount rate selection, para 11: Disputes may arise over what constitutes the appropriate risk-free discount rate, whether an illiquidity premium is properly added, and the calculation of the present value of incurred claims or unexpired risk.
• Discrete parameter choices and Sprague adjustments (Attachments 1-2): The formulaic sections and prescribed parameters involve actuarial assumptions and algebraic choices that can produce materially different numerical outcomes. Interpretation of application when a policy has unusual features or partial applicability can provoke disputes.
• APRA discretion and entity-specific notices, para 51: Where APRA has issued an entity-specific adjustment or exclusion, potential disputes could arise about the scope, effect, or procedural fairness of that notice, which in some cases can be subject to judicial review under administrative law principles (though no cases are cited in the instrument).

Because the Standard is a prudential instrument rather than a statute of general application, enforcement and disputes are likely to be channelled through APRA supervisory processes, administrative review or judicial review in the context of specific APRA decisions. The instrument itself provides no litigation record, and any case law that interprets these provisions would need to be located in external judicial or tribunal records.

Multiple “commencement” dates and parameter regimes: The instrument-level commencement is 29 March 2023, Application para 4 states the Standard applies to life companies from 1 January 2013, and Interpretation para 7 defines the date of commencement for calculation purposes as 30 June 2002 for friendly societies and 30 June 1998 for other companies. Attachment 1 also distinguishes PRE and POST parameter regimes around 1 July 2000 for tax-change effects. Implementers must read each relevant provision carefully to determine which “commencement” and which parameter regime apply to a specific policy, especially for starting amounts (paras 17-20), PRE/POST charge rules (Attachment 1 pts 1-2) and indexed fixed-dollar charges (Attachment 1 Part I note). Failure to apply the correct temporal regime could materially alter the minimum termination or paid-up value.

Method immutability after issue: Paragraph 27 prohibits changing the method used for determining minimum termination values after the policy is issued. This constrains post-issue re-pricing, product revamps or accounting changes that would alter policyholder entitlements. Life companies must document and lock in the method at issue and ensure systems maintain that method for the life of the policy.

APRA approval required for non-standard methods: Paragraph 8 requires a life company to obtain APRA’s written approval for a calculation method before issuing a policy that does not fit the types described in the Standard. This creates a pre-issue regulatory gate for novel products. Companies proposing new structures must factor APRA approval timing and the possibility of APRA-imposed conditions into product timelines.

Unbundled investment business edge cases: The unbundled investment business minimum termination value formula (para 14) has multiple elements that require careful treatment: starting amount (paras 17-20), normal investment earnings (paras 21-22), normal ongoing charges (para 23) and specified other charges (Attachment 1 Part II). Important operational rules include treating contractual increases in regular premiums as separate policies (para 15), reducing the item in para 14(e) for in-force regular premium policies at the date of commencement (para 16), and identifying vested versus non-vested credits when earnings are credited on a vested/non-vested basis (para 22). Misapplication here could understate or overstate the minimum termination value.

Unit pricing and fair value consistency: For investment-linked policies, paragraph 10(a) requires that unit prices used for termination values be consistent with the fair values of the assets. Firms using historical or smoothed unit prices must ensure reconciliation to asset fair values at termination, which may require adjustments to unit price methodologies or additional disclosures.

Debt secured against a policy and paid-up values: Paragraphs 42 and 45 permit secured debts to be offset in surrender or retained against paid-up values, but the company must be able to demonstrate correct application. Companies must ensure legal enforceability of security interests and that calculations of net payable amounts comply with the Standard.

Indexed fixed-dollar charges and CPI timing: Attachment 1 Part I states fixed dollar amounts shown are for 2012 and that the dollar amount applying in earlier or subsequent years is the figure indexed by CPI as published at 30 September of the immediately preceding year. Firms must operationalise CPI indexing on the correct dates to apply the correct fixed-dollar deduction, otherwise termination or paid-up values may be incorrectly calculated.

Exclusions for older policies: Paragraph 40(a) provides a carve-out for policies issued prior to 1 July 1995 where no regulated minimum surrender value applied at issue and the policy documentation clearly discloses non-availability of surrender entitlement. Companies relying on this exclusion must ensure the disclosure is clear and documented, otherwise the minimum surrender value rule may apply.

Parameter reliance and actuarial tables: Attachment 1 Part III prescribes mortality as the A1924-29 Table for certain calculations, and Part IV prescribes IA 90-92 where listed. These are specific historical actuarial tables; using different tables requires APRA approval or an alternative basis aligned with paragraph 8 approvals. Mistaken application of the wrong mortality table or Sprague adjustment factor changes paid-up and termination values materially.

APRA’s discretion and entity-specific notices: Paragraph 51 allows APRA to adjust or exclude a requirement by written notice in relation to a life company. Companies must track any such notices and ensure their internal compliance frameworks reflect entity-specific modifications. Conversely, companies should not assume that a public-text default applies where APRA has issued a private adjustment.

Formula complexity and implementation risk: Attachment 2 contains algebraic formulae and assumptions including Sprague adjustments, present-value factors and definitions of net premium, attained age, and term at issue. Implementing these formulae requires actuarial programming, robust data extraction (policy dates, premiums paid, bonuses declared), and validation. Errors in coding or assumptions will affect termination and paid-up values and therefore capital base inputs.

Identify the policy class and applicable method: The first step is to determine for each policy whether it falls into unbundled investment business, traditional business, long-term risk business, immediate annuity/fixed term/rate business, funeral bond, or risk business other than long-term. The Standard’s Part B sets the minimum termination value approach by class (paras 12-37), and Attachments 2-3 specify methodology for traditional business and specified policies. Document the class determination for audit.

Lock in and document the chosen calculation method at issue: Paragraph 27 forbids changing the method for determining minimum termination values after the policy is issued. Ensure product documentation and internal systems record which permitted method (Attachment 2 Part I or Part II, where relevant) was selected at issue and preserve that selection.

Obtain APRA approval when required: If a proposed policy does not fit the types described in the Standard, obtain written APRA approval for the method of calculating minimum termination, minimum surrender and minimum paid-up values before issuing the policy (para 8). Treat APRA approval as a pre-issue gating control and allow time in the product launch schedule.

Apply the prescribed parameters and indexing rules: Use the parameters in Attachment 1 appropriate to the policy, and apply PRE/POST rules for transactions relative to 1 July 2000 where indicated (Attachment 1 pts 1-2). For fixed-dollar charges apply CPI indexing using the CPI figure published at 30 September of the immediately preceding year (Attachment 1 Part I note). Implement systemised parameter tables so calculations are auditable and reproduceable.

For unbundled investment business, follow the stepwise formula: Implement the calculation in paragraph 14 and definitions in paras 15-23, including:

• Determine starting amount at commencement consistent with paras 17-20 depending on whether the policy is issued after commencement or in force at commencement, and depending on friendly society status.
• Aggregate premiums since commencement and normal investment earnings credited net of tax but before deductions (paras 14, 21).
• Deduct normal ongoing charges and specified other charges per Attachment 1 Part II, taking care to reduce 14(e) for in-force regular premium policies at commencement subject to para 16.
• Treat contractual increases in regular premiums as separate policies for the purposes of the calculation (para 15).

Ensure unit-price/fair-value consistency for investment-linked policies: For termination valuations of investment-linked policies, ensure the unit prices applied are consistent with fair values of the underlying assets (para 10(a)). This will typically require independent asset valuation, alignment of unit pricing rules, and reconciliation processes at termination.

Implement discounting and present-value floors correctly: Where the termination value involves deferred payments or discounted liabilities, use the risk-free discount rate as required (para 11), and include an illiquidity premium only where it is part of the risk-free best estimate liability. Where termination value floors require the discounted present value of incurred claims plus unexpired risks, calculate and document the components (para 10(b)).

Handle annuities and fixed term/rate business per Attachment 1 Part V and paras 28-37: For immediate life annuities with death-benefit returns, apply the lesser-of rules in para 29 and the face value cap. For annuities returning balance of purchase price, determine the “last date” per para 32. For fixed term/rate business calculate future guaranteed payments to term using the rate in Attachment 1 Part V and apply the fixed dollar reduction where applicable (paras 33-37).

Paid-up and surrender administration: For policies where the minimum surrender value applies, ensure the company pays at least the minimum surrender value or demonstrates compliance that payments are not less than the minimum surrender value less any debt secured by the policy (para 42). For paid-up policies, calculate the paid-up value at the date immediately preceding the unpaid premium for traditional regular premium business (para 46), and for unbundled investment business set the initial paid-up value to the greater of the contractual minimum and the minimum termination value at the date of becoming paid-up (para 49), then adjust subsequently for ongoing charges, investment earnings and transactions (para 50).

Recordkeeping and demonstrable compliance: Maintain records that support the class determination, the method selection at issue, all parameter values used (including CPI indexation steps), actuarial inputs (mortality table, Sprague adjustment, net premium derivation), unit price fair-value reconciliation for investment-linked policies, and any APRA approvals or entity-specific notices (paras 8, 42, 51-52). Paragraph 42’s demonstrability requirement implies document retention and audit trails sufficient for APRA review.

Manage secured debt mechanics carefully: If retaining or extinguishing debt secured by a policy on paid-up, choose and document the approach consistently (para 45) and ensure legal enforceability of security interests in accordance with applicable law. If extinguishing the debt, reduce the paid-up value in accordance with the Standard.

Track APRA notices and historic determinations: Maintain a registry of APRA approvals, waivers, notices and prior determinations that continue to have effect (para 52). Where APRA has adjusted or excluded requirements under para 51, ensure internal policy, actuarial models and client communications reflect the entity-specific position.

Quality assurance and actuarial validation: Given the algebraic complexity in Attachment 2 and the parameter dependency in Attachment 1, implement robust model validation and change-control procedures. Validate Sprague adjustments, present-value factor calculations, and net premium derivations. Ensure actuarial sign-off and independent model testing before applying calculations to policyholder entitlements or capital-base inputs.

Coordinate capital reporting: Because termination values feed into capital base measurement under LPS 112 (Objective and key requirements), coordinate actuarial outputs with capital and finance teams to ensure consistent treatment across prudential reporting, statutory fund accounting and product administration.

Plan for governance and product design constraints: Embed the immutability rule for the method post-issue and APRA approval timing into product governance, pricing, and contract wording to avoid unintended constraints on future product management.

Review disclosures: For older policies seeking exclusion from minimum surrender values (para 40(a)), verify that policy documentation and promotional material clearly disclosed non-availability of surrender. If planning to rely on exclusions, archive and be ready to produce documentary proof.

Finally, consider engaging APRA early for novel cases: Where a product is novel, overseas-taxed, or otherwise unclear in classification, seek APRA guidance or written approval under para 8 before issuance to avoid retrospective non-compliance and to obtain any necessary entity-specific adjustments under para 51.