Document ID: chunk:federal_register_of_legislation:F2023L00207:body:0:p2
Version: federal_register_of_legislation:F2023L00207
Segment Type: other
Provision Reference: 
Character Range: 2836–5951

than a friendly society: to each of its statutory funds; and

       (b)          for a friendly society: to each of its approved benefit funds and its management fund.

4.             This Prudential Standard only applies to the business of an Eligible Foreign Life Insurance Company which is carried out through its Australian statutory funds but not otherwise.[2]
5.             This Prudential Standard applies to life companies from 1 January 2013.

Interpretation
6.             Terms that are defined in Prudential Standard LPS 001 Definitions appear in bold the first time they are used in this Prudential Standard.
7.             Unless otherwise indicated:
       (a)          the term statutory fund will be used to refer to a statutory fund of a life company other than a friendly society, or an approved benefit fund of a friendly society, as relevant;

       (b)          the term general fund will be used to refer to the shareholders' fund of a life company other than a friendly society, or the management fund of a friendly society, as relevant; and

       (c)          the term 'fund' will be used to refer to a statutory fund or a general fund, as relevant.

Insurance Risk Charge
8.             This Prudential Standard sets out the method for calculating the Insurance Risk Charge.

9.             The Insurance Risk Charge for a statutory fund provides a buffer against the risks of adverse experience or changes to best estimate assumptions with regards to:
       (a)          mortality;
       (b)          morbidity;
       (c)          longevity;
       (d)          lapses;
       (e)          servicing expenses; and
       (f)           other insurance risks such as option take-up rates.
10.         The Insurance Risk Charge for a statutory fund is the reduction, if any, in the capital base that would occur if the adjusted policy liabilities were changed to an amount equal to the stressed policy liabilities determined under this Prudential Standard.
11.         The Insurance Risk Charge for the general fund of a friendly society is the servicing expense reserve as defined in paragraphs 52 to 55.
12.         There is no Insurance Risk Charge for the general fund of a life company other than a friendly society.

Stressed policy liabilities
13.         The stressed policy liabilities for non-participating benefits must be determined in the same way as the risk-free best estimate liability (RFBEL), but using 'stressed assumptions' instead of best estimate assumptions in respect of mortality, morbidity, longevity, lapses, servicing expenses and any other insurance risks such as take-up rates for non-financial options.
14.         The stressed policy liabilities for participating benefits must be determined in the same way as the participating policy liability (PPL), but using stressed assumptions instead of best estimate assumptions in respect of mortality, morbidity, longevity, lapses, servicing expenses and any other insurance contingencies such as take-up rates for non-financial options.
15.         Stressed assumptions must be used in determining the