Document ID: chunk:federal_register_of_legislation:F2023L00640:body:0:p6
Version: federal_register_of_legislation:F2023L00640
Segment Type: other
Provision Reference: 
Character Range: 13800–16910

data that can be reported for each field have also been provided.

Definitions

Terms in bold italics are defined in this Definitions section of these instructions.

A

Adjusted PML                                                      This is the PML after allowing for the adjustment to the PML. This is automatically calculated as:

                                                                      * PML

                                                                  less:

                                                                      * adjustment to the PML
Adjustment to the PML                                             For a Level 2 insurance group with an LMI that is no longer writing new business (i.e. in run-off), the sum insured is expected to decrease over the three-year scenario and it may be appropriate for an LMI in run-off to adjust its PML downwards. The methodology for adjusting an LMI's PML in a run-off situation must be approved by APRA and documented in the LMI's reinsurance management strategy.

Adjustments to LMI Concentration Risk Charge as approved by APRA  If APRA is of the view that the Standard Method for calculating the LMI Concentration Risk Charge component of the prescribed capital amount does not produce an appropriate outcome in respect of a Level 2 insurance group, or a Level 2 insurance group has used inappropriate judgement or estimation in calculating the LMI Concentration Risk Charge, APRA may adjust the LMI Concentration Risk Charge calculation for that Level 2 insurance group.

Allowable reinsurance                                             This is the lesser of available reinsurance and 60 per cent of the adjusted PML.

Available reinsurance                                             The methodology for calculating available reinsurance is detailed in Attachment A of GPS 116.

B

Basis for determination of H3 requirement  The Level 2 insurance group must select 'gross' if it has determined that the H3 requirement would be greater if it is based on the gross loss arising from the occurrence of a single event, when compared to the net loss arising from the occurrence of a single event.

                                           The Level 2 insurance group must select 'net' if it has determined that the H3 requirement would be greater if it is based on the net loss arising from the occurrence of a single event, when compared to the gross loss arising from the occurrence of a single event.

Basis for determination of H4 requirement  The Level 2 insurance group must select 'gross' if it has determined that the H4 requirement would be greater if it is based on the gross loss arising from the occurrence of a single event, when compared to the net loss arising from the occurrence of a single event.

                                           The Level 2 insurance group must select 'net' if it has determined that the H4 requirement would be greater if it is based on the net loss arising from the occurrence of a single event, when compared to the gross loss arising from the occurrence of a single event.