Document ID: chunk:federal_register_of_legislation:F2023L00738:body:0:p4
Version: federal_register_of_legislation:F2023L00738
Segment Type: other
Provision Reference: 
Character Range: 8439–11276

Charge of a fund is calculated as the maximum amount after applying each of the sub-limits to the relevant exposures.
19.         In the case of reinsurance exposures (both on-balance and off-balance sheet) to a group of related counterparties, exposures of a fund need to be compared and aggregated against each of the limits in Table 1 of Attachment A. This means that:
(a)          reinsurance exposures within the group that have a counterparty grade of 5 or below are compared to the limit (Table 1(c)) and an amount is determined;
(b)          reinsurance exposures of grade 5 and below that are not part of the calculation in sub-paragraph (a) are then added with those with a counterparty grade of 4 and compared to the limit (Table 1(b)), and a further amount is determined; and
(c)          reinsurance exposures of grade 4 and below that are not part of the calculation in sub-paragraphs (a) or (b) are then added to those with a counterparty grade above 4 and compared to the limit (Table 1(a)).
20.         The total Asset Concentration Risk Charge for the reinsurance exposure is the sum of the amounts from each sub-paragraph in paragraph 19.
21.         The total Asset Concentration Risk Charge is the sum of each resulting risk charge for each exposure of the private health insurer.

Treatment of collateral and guarantees as risk mitigants
22.         A private health insurer that holds certain types of collateral against an asset of a fund, or where the asset has been guaranteed, as a means of reducing risk may apply a different approach to determining the Asset Concentration Risk Charge for that asset. Where the assets in question are reinsurance recoverables due from non-APRA-authorised reinsurers, different rules regarding treatment of collateral and guarantees apply (refer to paragraphs 28 to 34).

Collateral
23.         Subject to paragraph 24, where a private health insurer possesses eligible collateral against an asset of a fund (other than reinsurance recoverables due from non-APRA-authorised reinsurers), it may treat the underlying asset as an exposure to the Eligible Collateral Item. This means that the asset is included in the limits in Attachment A with respect to the collateral, rather than the underlying counterparty.
24.         For the purposes of paragraph 23, collateral is recognised only to the extent that it takes the form of a registered charge, registered mortgage or other legally enforceable security interest in, or over, an Eligible Collateral Item. Eligible Collateral Items are cash, government securities, or debt obligations (i.e. loans, deposits, placements, interest rate securities and other receivables) where the counterparty has a counterparty grade of 1, 2 or 3. The Eligible Collateral Item must be held for a period not less than that for which the asset is