Document ID: chunk:federal_register_of_legislation:F2023L00738:body:0:p5
Version: federal_register_of_legislation:F2023L00738
Segment Type: other
Provision Reference: 
Character Range: 11041–13919

loans, deposits, placements, interest rate securities and other receivables) where the counterparty has a counterparty grade of 1, 2 or 3. The Eligible Collateral Item must be held for a period not less than that for which the asset is held.
25.         Where the fair value of the collateral does not cover the full value of the asset, the collateral counterparty rating can only replace that part of the asset that is covered by the collateral. The remaining portion of the asset must be treated as an exposure to the underlying counterparty.

Guarantees
26.         Subject to paragraph 27, where a private health insurer possesses an asset in a fund (other than reinsurance recoverables due from non-APRA-authorised reinsurers) that has been explicitly, unconditionally and irrevocably guaranteed for its remaining term to maturity by a guarantor with a counterparty rating (or for governments, the long-term foreign currency credit rating) of grade 1, 2 or 3, it may treat the underlying asset as an exposure to the counterparty providing the guarantee. This means that the asset is included in the limits in Attachment A with respect to the guarantee, rather than the underlying counterparty.
27.         Guarantees provided to a private health insurer by its own parent or a related entity are not eligible for the treatment provided for in paragraph 26.

Reinsurance recoverables due from non-APRA-authorised reinsurers

Collateral
28.         Subject to paragraphs 29, 30 and 33, where a private health insurer possesses eligible collateral in Australia against reinsurance recoverables due to a fund from a non-APRA-authorised reinsurer, it may elect to treat the reinsurance recoverable as an exposure to the eligible collateral. This means that the asset is included in the limits in Attachment A with respect to the collateral, rather than the underlying reinsurer.
29.         For the purposes of paragraph 28, eligible collateral is recognised only:
(a)          to the extent that it takes the form of:
(i)            assets held in Australia which form part of a trust fund maintained by a trustee resident in Australia;
(ii)         deposits held by the private health insurer or its fund in Australia made by the non-APRA-authorised reinsurer;
(iii)       a combination of the two forms of collateral specified in sub-paragraphs (i) and (ii); or
(iv)        any other form of collateral as may be approved by APRA in a particular case;
(b)          if it provides effective security against liabilities arising under the reinsurance contract; and
(c)          if it is not available for distribution to creditors of the reinsurer other than the private health insurer or its fund in the event of insolvency of the reinsurer.
30.         Where the fair value of the collateral does not cover the full value of the reinsurance recoverables, only the part of the