Document ID: chunk:federal_register_of_legislation:F2024L00886:body:0:p5
Version: federal_register_of_legislation:F2024L00886
Segment Type: other
Provision Reference: 
Character Range: 11086–14049

For the purpose of determining the asset concentration limits for reinsurance assets, VAF is determined as in paragraph 16 but with the following modifications:
(a)          the stressed value of reinsurance assets is added to VAF in place of the value of adjusted reinsurance assets of the fund; and
(b)          VAF excludes assets allocated to support:
(i)            participating traditional business and participating unbundled investment business (gross policy liabilities, policy owners' retained profits, and shareholders' retained profits);
(ii)         non-participating benefits with entitlement to discretionary additions (gross policy liabilities only).
The stressed value of reinsurance assets must be determined in accordance with paragraph 17. For the purposes of paragraph 20(a), where a life company has entered into deferred premiums, deposit backs or funds withheld arrangements, the stressed value of reinsurance assets must be reduced by the value of assets held in the statutory fund under these arrangements (regardless of whether they meet the requirements for netting under paragraph 28).

Exposures
21.         All exposures to a reinsurer or reinsurance group are to be considered a single counterparty exposure (for the purposes of applying the relevant limits in Attachment A).
22.         Exposures must be the effective exposures of the fund to each asset or counterparty, including both on-balance sheet and off-balance sheet exposures. If collateral or a third party guarantee has been used in place of an asset under LPS 114, the collateral or exposure to the guarantor must also be used in place of the asset for the purposes of this Prudential Standard. If a look-through basis has been used for assets under LPS 114, the same look-through basis must be used for the purposes of this Prudential Standard.
23.         Where the fund has a significant cumulative exposure through different classes of assets to a single counterparty or related counterparties, the limit for that counterparty in respect of any particular asset class must be reduced by the lesser of the actual exposure or the exposure limit to that same counterparty in respect of all asset classes with lower limits in Attachment A. This requirement does not apply to the aggregate limits for other reinsurance arrangements specified in paragraph 3 of Attachment A.
24.         Where the policy liabilities are in respect of investment-linked benefits linked to the asset or credit exposure in question and there has been full disclosure to policy owners of the risks to which they are exposed, no asset concentration limits apply.
25.         Where the asset or credit exposure is in respect of bank bills, bank deposits, bank guarantees, letters of credit issued by a bank, bank bonds or Negotiable Certificates of Deposit (NCDs) issued by a bank, bank for this purpose means:
(a)          an authorised deposit-taking institution (ADI); and
(b)          in