Document ID: chunk:federal_register_of_legislation:F2023L00709:body:0:p7
Version: federal_register_of_legislation:F2023L00709
Segment Type: other
Provision Reference: 
Character Range: 16598–20116

from the Asset Risk Charge stresses, reduced to allow for the reduction in Asset Risk Charge due to the aggregation formula.

I

Insurance Concentration Risk Charge  The Insurance Concentration Risk Charge is the minimum amount of capital required to be held against insurance concentration risks. The Insurance Concentration Risk Charge relates to the risk of an adverse movement in the reporting Level 2 insurance group 's capital base due to a single large loss or series of losses.

                                     This must be determined in accordance with Prudential Standard GPS 116 Capital Adequacy: Insurance Concentration Risk Charge.

Insurance Risk Charge                The Insurance Risk Charge is the minimum amount of capital required to be held against insurance risks determined in accordance with Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge (GPS 115). The Insurance Risk Charge relates to the risk that the value of net insurance liabilities determined in accordance with Prudential Standard GPS 340 Insurance Liability Valuation (GPS 340) is insufficient to cover associated net claim payments and associated claim expenses as they fall due.

                                     This must be calculated as the sum of:

                                         * Total OCL Insurance Risk Charge; and
                                         * Total PL Insurance Risk Charge.

O

Operational Risk Charge                                                       The Operational Risk Charge is the minimum amount of capital required to be held against operational risks. The Operational Risk Charge relates to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

                                                                              This must be determined in accordance with Prudential Standard GPS 118 Capital Adequacy: Operational Risk Charge (GPS 118).

Operational Risk Charge for inwards reinsurance business (ORCI)               This is the Operational Risk Charge relating to the reporting Level 2 insurance group's inwards reinsurance business. This must be calculated using the ORCI formula in accordance with GPS 118.

Operational Risk Charge for business that is not inwards reinsurance (ORCNI)  This is the Operational Risk Charge relating to business written directly by the reporting Level 2 insurance group. This must be calculated using the ORCNI formula in accordance with GPS 118.

P

Prescribed capital amount  The prescribed capital amount must be determined in accordance with GPS 110.

                           It is calculated as the sum of:

                               * Insurance Risk Charge;
                               * Insurance Concentration Risk Charge;
                               * Asset Risk Charge;
                               * Asset Concentration Risk Charge;
                               * Operational Risk Charge;
                               * adjustments to prescribed capital amount as approved by APRA; and

                           less:

                               * aggregation benefit.

                           For a Level 2 insurance group, the prescribed capital amount is subject to a minimum of $5 million.

R

Risk charge components  The risk charge components, have the same meaning as in, and must be calculated in accordance with, GPS 114. These are calculated by determining the fall in the capital base