Document ID: chunk:federal_register_of_legislation:F2023L00569:body:0:p6
Version: federal_register_of_legislation:F2023L00569
Segment Type: other
Provision Reference: 
Character Range: 13986–17022

meets the following criteria:

     * it is subject to authorisation, licensing or other means of recognition by a government or other competent authority;

     * it has rules, issued or approved, by the government or other competent authority defining the conditions:

         + for the operation of the exchange;

         + for access to the exchange; and

         + that must be satisfied by a contract before it can be executed on the exchange;

     * it has a mechanism that provides clearing services for contracts executed through the exchange;

     * it functions regularly;

     * the exchange has a prudent and frequent margining system where relevant;

     * the exchange requires settlement on a particular day as applicable;

     * members of the exchange are themselves subject to supervision by the exchange or a competent authority; and

     * the operations of the exchange in turn are supervised by government or other competent authority.

    5.5.           Limited risk transfer arrangements

An insurer must submit to APRA details of all proposed limited risk transfer arrangements for approval prior to entering into such arrangements. APRA may approve a limited risk transfer arrangement as either a reinsurance arrangement or a financing arrangement.

APRA will generally consider a limited risk transfer arrangement to be a reinsurance arrangement where the purpose and effect of the arrangement is to genuinely transfer significant insurance risk from the insurer to another re(insurer).

A limited risk transfer arrangement that is approved by APRA as a reinsurance arrangement must be treated accordingly by the insurer for prudential purposes.

A limited risk transfer arrangement that is approved by APRA as a financing arrangement must be accounted for by the insurer so that:

    (a)          the arrangement has a legitimate purpose and effect; and

    (b)          the arrangement will not misrepresent, or is not designed to disguise, a material risk to the insurer's current or continuing profitability, solvency or capital adequacy so as to mislead or be likely to mislead any party.

The terms and conditions of the financing arrangement will determine the appropriate accounting treatment for prudential purposes.

Where APRA determines that a limited risk transfer arrangement is to be treated as a financing arrangement, the insurer must not treat the arrangement as reinsurance for the purpose of determining the Prudential Capital Requirement under the Prudential Standards or as reinsurance for any other purpose.

    6.             Specific instructions for Level 2 groups

    This section is applicable to Level 2 groups only.

    6.1.           Completion of reporting tables

The reporting tables for Level 2 insurance groups are to be completed by the parent entity of a Level 2 insurance group as defined under Prudential Standard GPS 001 Definitions (GPS 001). Consolidation at Level 2 must cover the Level 2 insurance group as defined under GPS