Document ID: chunk:federal_register_of_legislation:F2024L00884:body:0:p11
Version: federal_register_of_legislation:F2024L00884
Segment Type: other
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Character Range: 26596–29463

(d)          is contributed by a group member and the funding of which contains cross-default clauses that would be triggered as a result of the life company failing to meet any servicing obligations.
46.         In assessing the overall strength of the capital adequacy of a life company APRA will have regard to the level of capital adequacy of individual group members of a group to which the life company belongs, including any limitations in the amount of capital that may be readily extracted from individual group members to provide support, if required, to recapitalise the life company.
47.         In assessing the overall capital strength of a life company, APRA may request that the parent entity provide APRA with details of relevant intra-group exposures, including capital transactions and intra-group guarantees. The information on intra-group exposures would typically include details of all intra-group exposures provided by the life company to other members of the group. APRA may also request details of material exposures between other members of the group to which it belongs.

Holding of capital instruments in group members by other group members
48.         Capital instruments of a life company that are held as direct investments by a vehicle[9] subject to consolidation within the financial statements of the group to which it belongs in accordance with Australian Accounting Standards, may be included in Common Equity Tier 1 Capital, Additional Tier 1 Capital and Tier 2 Capital, or the capital base of a statutory fund, only if:
(a)          the life company (or relevant vehicle, other than a parent company of the life company, in respect of its own holdings of these instruments) did not fund the acquisition of the capital instruments (i.e. acquisition of capital instruments is funded by third parties such as life insurance policy owners or other third-party investors);
(b)          the risk and rewards associated with the investments are borne primarily by third parties;
(c)          the life company can demonstrate to APRA, if required, that decisions to acquire or sell such capital instruments are made independently of the issuer of the capital instruments and in the interests of the third parties who primarily bear the risks and rewards of the investments in the instruments; and
(d)          the instruments are not held for the purposes of employee share-based remuneration scheme.
49.         Direct investments in shares of a life company by an SPV (e.g. a trust) established under a share-based employee remuneration scheme may be included in the life company's Common Equity Tier 1 Capital only if:
(a)          the shares issued to the SPV represent ordinary shares of the life company;
(b)          the amount included in Common Equity Tier 1 Capital is matched by an equivalent charge to profit or loss of the