Document ID: chunk:federal_register_of_legislation:F2023L00672:body:0:p10
Version: federal_register_of_legislation:F2023L00672
Segment Type: other
Provision Reference: 
Character Range: 24919–27866

of the reinsurance claim.
42.         An insurer that has exposures to natural perils must determine the cost (if any) of reinstating catastrophe reinsurance cover after the occurrence of the first three H4 losses or the first three net H4 losses, as appropriate (H4 reinstatement cost). 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 insurer does not have contractually agreed rates for the reinsurance cover, the insurer 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 insurer 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.

PL offset
43.         The Appointed Actuary of the insurer must determine the portion of the net premiums liability provision which relates to catastrophic losses[12] (PL offset). PL offset by class of business is determined by:
        (a)          calculating the amount of the insurer's net premiums liability central estimate provision[13] that relates to catastrophic losses;

        (b)          annualising the amount from sub-paragraph (a);

        (c)          adding the diversified risk margin[14] to the amount from sub-paragraph (b); and

        (d)          adding the Premiums Liability Risk Charge[15] to the amount from sub-paragraph (c).

    The Appointed Actuary must then sum the outcomes from sub-paragraph (d) by class of business to determine the total PL offset. The Appointed Actuary must provide this determination to the insurer in a timely manner that allows the insurer to lodge reporting forms to APRA within the timeframes specified by the Reporting Standards made under the Financial Sector (Collection of Data) Act 2001. The Appointed Actuary must include details of the determination of the PL offset for the reporting year and the estimated PL offset to be utilised in the upcoming year in the Actuarial Valuation Report (AVR).

Other accumulations vertical requirement
44.         The other accumulations vertical requirement (OA VR) for an insurer that has exposures to other accumulations is calculated as:
       (a)          'OA PML' defined in paragraphs 47 and 48; less

       (b)          'OA reinsurance recoverables' defined in paragraph 49; plus

       (c)          'OA reinstatement cost' defined in paragraph 52.

45.         An insurer must regularly monitor the level of its OA VR, including determining the impact of the occurrence of an event. Where an event occurs during the reporting period, the insurer must determine the impact of that event on the level of OA VR. Any changes made to the OA VR as a result