Document ID: chunk:federal_register_of_legislation:F2023L00627:body:0:p5
Version: federal_register_of_legislation:F2023L00627
Segment Type: other
Provision Reference: 
Character Range: 11159–14581

Adjustments to prescribed capital amount as approved by APRA  These are adjustments made to a fund's prescribed capital amount if APRA is of the view that the Standard Method for calculating the prescribed capital amount does not produce an appropriate outcome in respect of a fund, or if a life company has used inappropriate judgement or estimation in calculating the prescribed capital amount for that fund.

                                                              Approved adjustments are to be reported separately in Table 1 of Reporting Standard LRS 111.0 Adjustments and Exclusions highlighting the description of the adjustment, transitional status and amount of adjustment applied.

Aggregate risk charge for variable annuities                  This amount is the aggregate risk charge for variable annuity business that relates to asset and insurance risks, after allowance for diversification.

                                                              This must be determined in accordance with the prescribed approach set out in LPS 110.

Aggregation benefit                                           The aggregation benefit relates to the recognition of diversification benefits between asset and insurance risks for life business other than variable annuities.

                                                              This must be calculated in accordance with the prescribed formula in LPS 110.

Asset Concentration Risk Charge                               The Asset Concentration Risk Charge is the minimum amount of capital required to be held against asset concentration risks. The Asset Concentration Risk Charge relates to the risk resulting from investment concentrations in individual assets or large exposures to individual counterparties or groups of related counterparties resulting in adverse movements in the fund's capital base.

                                                              This must be determined in accordance with Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge.

Asset Risk Charge                                             The Asset Risk Charge is the minimum amount of capital required to be held against asset risks. The Asset Risk Charge relates to the risk of adverse movements in the value of the fund's capital base due to credit or market risks.

                                                              This must be determined in accordance with Prudential Standard LPS 114 Capital Adequacy: Asset Risk Charge (LPS 114).

Asset Risk Charge - aggregated risk charge component          A life company must calculate, for each of its funds, the risk charge components defined in LPS 114 by considering the impact on the capital base of the fund of a range of stresses. These risk charge components are then aggregated using the formula set out in LPS 114. The result of applying the formula is defined as the Asset Risk Charge - aggregated risk charge component.

Asset Risk Charge - impact of diversification                 The Asset Risk Charge - impact of diversification relates to the recognition of diversification benefits between the asset risk charge components as set out in LPS 114.

                                                              This must be calculated as the sum of the risk charge components less the Asset Risk Charge - aggregated risk charge component.

C
Combined Stress