Document ID: chunk:federal_register_of_legislation:F2023L00673:body:0:p10
Version: federal_register_of_legislation:F2023L00673
Segment Type: other
Provision Reference: 
Character Range: 24252–27241

showing the projected future capital position (including PCR) after the proposed capital reductions. The forecast should extend for at least two years.
51.         A life company must satisfy APRA that its capital base will remain adequate for its future needs after a proposed reduction.

Materiality
52.         A life company may take into account materiality when calculating its capital base and prescribed capital amount. Particular values or components are considered material to the overall result of a calculation if misstating or omitting them would produce results likely to be misleading to the users of the information.

Notification requirements
53.         A life company must inform APRA as soon as practicable of:
(a)          any breach or prospective breach of its PCR or the PCR of any of its funds;
(b)          any significant departure from its ICAAP; or
(c)          any significant adverse changes in the capital base or PCR of the company or any of its funds.
    The notice must include any remedial actions taken or planned to be taken to address the situation and the timing of these actions.

Adjustments and exclusions
54.         APRA may, by notice in writing to a life company, adjust or exclude a specific requirement in this Prudential Standard in relation to that life company.

Previous exercise of discretion
55.         A life company 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 - Variable annuities
     1. The calculation of the prescribed capital amount for a statutory fund containing variable annuity business must be undertaken in accordance with this Attachment.
     2. Variable annuities are a type of life insurance product that has special features that are not adequately catered for under the Standard Method. Accordingly, more sophisticated modelling must be performed to determine the prescribed capital amount for a statutory fund with liabilities for this type of product.
     3. The required modelling could be undertaken using stochastic techniques or scenario-based techniques, as long as the techniques are adequate for assessing the risks inherent in the relevant variable annuities. The modelling must consider both asset and insurance risks simultaneously.
     4. The modelling of asset and insurance risks must be consistent with the principles outlined in paragraph 30 of this Prudential Standard and LPS 114 and LPS 115 respectively.
     5. The following issues must be addressed in determining the prescribed capital amount for a statutory fund with liabilities for variable annuities:
(a)          the uncertainty associated with the company's ability to implement any required hedging strategy in a timely and effective manner;
(b)          the effectiveness of hedging arrangements;
(c)          the ability to