Document ID: chunk:federal_register_of_legislation:F2023L00686:body:0:p4
Version: federal_register_of_legislation:F2023L00686
Segment Type: other
Provision Reference: 
Character Range: 8231–11673

allocating the contract on a pro rata basis to each of the relevant categories; or

       (b)          allocating the contract to the category which represents the greatest exposure; or

       (c)          allocating the contract to the category representing the greatest premium income.

    The regulated institution may use an alternative method from those listed above for allocating inwards reinsurance business that spans multiple classes. The regulated institution must be able to demonstrate that the chosen method is appropriate and is used for all contracts and all subsequent periods.

Material net written premium
17.         With respect to direct business and reinsurance business where policies incept in the following reporting period and where these policies would have a material impact on capital adequacy, net written premium for exposure that has not been included in the calculation of the premiums liabilities is to be subject to the premiums liabilities risk charge.[2] This premium amount is defined as 'material net written premium'. The materiality of the business that incepts in the next reporting period should be determined in accordance with the Australian accounting and auditing standards subject to APRA's discretion.
18.         For inwards proportional reinsurance contracts, the value of material net written premium calculated in paragraph 17 must reflect the full premium revenue expected for the full term[3] of the reinsurance contract, where revenue has not yet been recognised, subject to the appropriate subsection below:
       (a)          where the remaining term of the contract is five years or less, the value of material net written premium should not exceed the net premium revenue forecast for 18 months from the end of the current reporting period; or

       (b)          where the remaining term exceeds five years, an insurer may approach APRA to determine alternate treatment.

Securitisation
19.         If a regulated institution securitises insurance liabilities, the net insurance liabilities may reduce. The regulated institution must apply to APRA for approval to include the securitisation transaction in the Insurance Risk Charge.

Adjustments and exclusions
20.         APRA may, by notice in writing to a regulated institution, adjust or exclude a specific requirement in this Prudential Standard in relation to that regulated institution.

Previous exercise of discretion
21.          A regulated institution must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion made by APRA under a previous version of this Prudential Standard.

Attachment A

   Table 1:  Direct insurance business
Category  Class of business             Outstanding     Premiums Liability Risk Capital Factor
                                        Claims Risk     (%)
                                        Capital Factor
                                        (%)
A         Householders                  9.0             13.5
          Commercial Motor
          Domestic Motor
B         Travel                        11.0            16.5
          Fire and ISR
          Marine and Aviation
          Consumer Credit
          Other Accident
C         Mortgage                      14.0            21.0
          CTP
          Public and Product Liability
          Professional