Document ID: chunk:federal_register_of_legislation:F2024L01525:body:0:p27
Version: federal_register_of_legislation:F2024L01525
Segment Type: other
Provision Reference: 
Character Range: 72717–75617

in (a) of this paragraph to be capable of being ascertained immediately and objectively; and
         3.           Set the maximum number of mutual equity interests received such that the aggregate nominal value of the interests received cannot exceed, at the date of conversion, the nominal value of the Additional Tier 1 Capital instrument converted.
10.          Conversion must generate an unequivocal addition to Common Equity Tier 1 Capital of the private health insurer under Australian Accounting Standards.
11.          In issuing Additional Tier 1 Capital instruments a private health insurer may, within the category of Additional Tier 1 Capital:
         1.           differentiate between instruments as to whether an instrument is required to convert or be written-off in the first instance; and
         2.           provide for a ranking under which Additional Tier 1 Capital instruments will be converted or written off.
12.          Where an Additional Tier 1 Capital instrument provides for a write-off mechanism, this mechanism must be structured so that:
         1.           the claim of the holder of the instrument on liquidation of the issuer is reduced to, or below, the value of the written-off instrument;
         2.           the amount of the instrument that may be paid if a call is exercised is irrevocably reduced to the value of the instrument after write-off;
         3.           there is an immediate and unequivocal addition to the Common Equity Tier 1 Capital of the private health insurer; and
         4.           the distribution or payments payable on the instrument must be permanently reduced (i.e. distributions or payments must be calculated at no more than the rate set for the written-off value of the instrument).
13.          The instrument must not include a mechanism that would require a holder to sell the instrument to the issuer or a related entity of the issuer other than as part of a call option or redemption of the instrument. A mechanism that requires a holder to sell the instrument to a nominated party other than the issuer or a related entity of the issuer will not constitute an incentive to redeem provided there is at least two years from the date upon which the holder is required to sell the instrument to the nearest subsequent date upon which conversion may be exercised.
14.          Where an instrument is drawn down in a series of tranches, it must meet the requirements in this Prudential Standard as if each tranche is a separate Additional Tier 1 Capital instrument in its own right.
15.          The documentation of any debt instrument or any other capital instrument of the issuer of an Additional Tier 1 Capital instrument must not include any of the following clauses:
         1.           a cross-default clause linking the issuer's obligations under the Additional Tier 1 Capital instrument to default by the