Document ID: chunk:federal_register_of_legislation:F2023L00673:body:0:p8
Version: federal_register_of_legislation:F2023L00673
Segment Type: other
Provision Reference: 
Character Range: 18859–21823

Asset Risk Charge;
       (b)          'I' is the Insurance Risk Charge; and
       (c)          'correlation' is 20 per cent.
38.         The Asset Concentration Risk Charge and the Operational Risk Charge are not included in the calculation of the aggregation benefit.

Combined stress scenario adjustment
39.         Future shareholder tax benefits arising in the stressed scenarios are recognised in determining the Insurance Risk Charge and Asset Risk Charge. A life company must increase the prescribed capital amount by the aggregate amount of any tax benefits that cannot be netted against deferred tax liabilities as specified in LPS 112.
40.         In the calculation of the Insurance Risk Charge and Asset Risk Charge, an allowance may be made for any anticipated management actions that would reduce future policy benefits, for example, increasing fees and premium rates, reducing surrender values and reducing bonuses and other discretionary additions to policy owner benefits. However, there are limits to the extent to which policy benefits can be reduced. A life company must increase the prescribed capital amount if the aggregated management actions would reduce policy benefits below these limits.
41.         The method for calculating the combined stress scenario adjustment is specified in Attachment B.

APRA may adjust the Standard Method for calculating the prescribed capital amount
42.         If APRA is of the view that the Standard Method for calculating the prescribed capital amount does not produce an appropriate outcome in respect of a particular fund, or a life company has used inappropriate judgement or estimation in calculating the prescribed capital amount, APRA may, in writing, adjust any aspect of the prescribed capital amount calculation for that fund. If such an adjustment is applied to a fund under this paragraph, a life company must comply with the adjusted calculation.

Supervisory adjustment
43.         APRA recognises that any measure of the adequacy of a fund or a life company's capital involves judgement and estimation, including quantification of risks that may be difficult to quantify. If APRA is of the view that there are prudential reasons for doing so, APRA may, in writing, determine a supervisory adjustment to be included in the PCR of a fund or life company.

Disclosure
44.         To improve the understanding of its capital adequacy position by policy owners and other market participants, a life company must publish, at least annually, the following items for the life company as a whole:
(a)          the amount of Common Equity Tier 1 Capital;
(b)          the aggregate amount of any regulatory adjustments applied in the calculation of Common Equity Tier 1 Capital;
(c)          the amount of Additional Tier 1 Capital;
(d)          the aggregate amount of any regulatory adjustments applied in the calculation of Additional Tier 1 Capital;
(e)          the amount of Tier 2 Capital;