Document ID: chunk:federal_register_of_legislation:F2023L00672:body:0:p13
Version: federal_register_of_legislation:F2023L00672
Segment Type: other
Provision Reference: 
Character Range: 32950–35897

process; and
(iii)       the sensitivity of the model outputs as a result of the factors in (i) and (ii).

Review and reporting
56.         An insurer must document in its ReMS the process and methodologies for setting and monitoring its Insurance Concentration Risk Charge. This must also include justification for any adjustments or assumptions made, such as all allowances made for aggregate reinsurance cover and adjustments to OA VR. GPS 230 sets out further details on this requirement.
57.         In addition to the requirements of paragraph 56, an insurer that writes lenders mortgage insurance business must outline in its ReMS how it manages the exposures and mitigants in place for the risk in relation to future placement of reinsurance arrangements.
58.         The Appointed Actuary of an insurer must review and comment on the adequacy of the calculation of the Insurance Concentration Risk Charge as part of the Financial Condition Report. For an insurer that has other accumulations exposures, the Appointed Actuary must consider the impact on the Insurance Concentration Risk Charge of the occurrence of multiple events in a year.
59.         An insurer must inform APRA within 20 business days of any material changes to its Insurance Concentration Risk Charge that results from any changes in its ReMS, risk profile, classes of business underwritten or reinsurance program.

Adjustments and exclusions
60.         APRA may, by notice in writing to a regulated institution, adjust or exclude a specific requirement in this Prudential Standard in relation to that regulated institution.

Previous exercise of discretion
61.         A regulated institution must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion made by APRA under a previous version of this Prudential Standard.

Attachment A – Lenders mortgage insurer concentration risk charge

     1. This Attachment applies to a lenders mortgage insurer (LMI) for the purposes of determining the lenders mortgage insurer concentration risk charge (LMICRC).

     2. For the purposes of this Attachment:

       (a)          'Loans' are loans secured by an insured mortgage over residential or other property;

       (b)          'Sum insured' is the original exposure amount for an LMI as stated in the mortgage insurance policy;

       (c)          'Loan-to-Valuation Ratio' (LVR) is the ratio of the amount of the loan to the value of the secured residential property, as at the date of origination of the loan. Where the mortgage insurance premium is capitalised in the loan amount, the LVR must be calculated including the premium; that is, the loan amount must be increased by the amount of the capitalised premium, irrespective of whether the premium is insured. The inclusion of a First Home Owners Grant in the deposit for a mortgaged property will