Document ID: chunk:federal_register_of_legislation:F2023L00640:body:0:p9
Version: federal_register_of_legislation:F2023L00640
Segment Type: other
Provision Reference: 
Character Range: 22523–25975

unless these have been contractually agreed with the reinsurer(s). If reinstatements are included, the cost of reinstatement must be netted from the offset. The Level 2 insurance group must agree with APRA a methodology for the determination of this adjustment.

                             This methodology may allow for any portion of paid and outstanding claims and PL that contribute to the Level 2 insurance group's retained losses for the purposes of the retention on any aggregate reinsurance cover, provided it does not result in a double-count between this offset and the PL offset.

                             The total H4 aggregate offset is calculated as the sum of:

                                   *        first event;
                                   *        second event;
                                   *        third event; and
                                   *        fourth event.

H4 loss per event            The H4 loss per event is calculated for each H4 event as the sum of:

                                 * single event loss from H4 event;
                                 * H4 reinstatement cost;

                             less:

                                 * H4 reinsurance recoverables;
                                 * H4 aggregate offset; and
                                 * H4 reinstatement premiums.

H4 reinstatement cost        H4 reinstatement cost is the cost (if any) of reinstating catastrophe reinsurance cover after the occurrence of the first three H4 losses. The cost (if any) must reflect the cost of reinstating reinsurance cover up to the size of the fourth event. In determining this cost, if the Level 2 insurance group does not have contractually agreed rates for the reinsurance cover, the Level 2 insurance group must estimate the cost based on the reinsurance market conditions that would prevail after the occurrence of the events. The amount must not be less than the full original cost of the cover, with no deduction for the expiry of time since the inception of the reinsurance arrangements unless the Level 2 insurance group is able to demonstrate to APRA that the amount materially overstates the cost that would prevail in the market after the occurrence of the events.

                             The total H4 reinstatement cost is calculated as the sum of:

                                 * first event;
                                 * second event; and
                                 * third event.

H4 reinstatement premiums    H4 reinstatement premiums are applicable to Level 2 insurance groups that write reinsurance and may receive inwards reinstatement premiums from cedants as a result of the events that give rise to three H4 losses. H4 reinstatement premiums must only be included in NP HR if the reinsurance contract specifically stipulates that offsetting with the cedant will occur at the time of the payment of the reinsurance claim.

                             The total H4 reinstatement premiums is calculated as the sum of:

                                 * first event;
                                 * second event;
                                 * third event; and
                                 * fourth event.

H4 reinsurance recoverables  H4 reinsurance recoverables are the level of potential reinsurance recoverables should there be the occurrence of four H4 losses over the catastrophe reinsurance program treaty