Document ID: chunk:federal_register_of_legislation:F2024L00886:body:0:p14
Version: federal_register_of_legislation:F2024L00886
Segment Type: other
Provision Reference: 
Character Range: 37181–41733

base; and
                                                                                                                                                                                                                                                        iii)   AUD 22 million.

(g)  A reinsurance arrangement with an APRA approved affiliated entity of the life company that is not a registered life company, where the related entity has a counterparty grade of 1, 2 or 3:                                                     The greater of:
                                                                                                                                                                                                                                                        i)        12.5% of VAF; and
                                                                                                                                                                                                                                                        ii)     62.5% of capital base.

(h)    i)  any other actively traded security;                                                                                                                                                                                                        The greater of:
       ii)  a non-traded security, loan, or reinsurance arrangement with a counterparty grade of 1, 2 or 3;                                                                                                                                             i)       5% of VAF; and
       iii) real estate; or                                                                                                                                                                                                                             ii)     25% of capital base.
       iv) other income producing real property asset:

(i)  Any asset not covered by any of the above categories:                                                                                                                                                                                            The greater of:
                                                                                                                                                                                                                                                        i)        2.5% of VAF; and
                                                                                                                                                                                                                                                        ii)     12.5% of capital base.

2.             For reinsurance arrangements that were included in item (e) or (g) at the time the reinsurance arrangement was entered into but which no longer have a counterparty grade of 1, 2 or 3:
(a)          within the first 3 months of the downgrade below Grade 3 the arrangement continues to have the limit specified in (e) or (g);
(b)          within the next 9 months the limit specified in (e) or (g) is reduced by 34 per cent;
(c)          within the second 12 months after the downgrade the limit specified in (e) or (g) is reduced by 66 per cent;
(d)          thereafter, the reinsurance arrangement is included in item (i).
3.             For reinsurance arrangements included in items (g), (h) and (i) which are not with a registered life company or appropriate retrocessionaire, an aggregate limit for all such arrangements applies, equal to the greater of:
(a)          12.5 per cent of VAF; and
(b)          62.5 per cent of capital base.
    To avoid double counting of excess exposures, for the purposes of this paragraph the asset value for each reinsurance arrangement is subject to a maximum of the individual limit for the arrangement.
    If the asset value of a reinsurance arrangement is negative it must not be included in the aggregate value.
4.             For the purpose of calculating the Asset Risk Charge according to LPS 114, any Asset Concentration Risk Charge that results from applying the aggregate limit must be allocated across reinsurance arrangements which are not with a registered life company or appropriate retrocessionaire in proportion to the exposure amount for the arrangement that is being assessed against the aggregate limit.

[1]  Refer to subsection 21(1) of the Act.
[2]  Refer to section 16ZD of the Act.