Document ID: chunk:federal_register_of_legislation:F2023L00694:body:0:p5
Version: federal_register_of_legislation:F2023L00694
Segment Type: other
Provision Reference: 
Character Range: 11351–14416

participating business. The BEL calculation method forms the basis for deriving RFBEL in LPS 112.
13.         For all business, BEL must be calculated in accordance with the requirements outlined in Part D of this Prudential Standard.

Part A – Policy classification and application

Policy classification and application
14.         For the purposes of this Prudential Standard, life companies must classify policies as either friendly society business, life insurer non-participating business or life insurer participating business.[3]
15.         Where a policy that provides participating benefits is classified as an investment contract under Australian Accounting Standards a life company may, under subsection 15(4) of the Act, request that APRA declare the benefits to be non-participating so that the policy may be classified as life insurer non-participating business under this Prudential Standard.
16.         Subject to paragraphs 18 and 19, a life insurer must make a separate valuation of policy liabilities for each statutory fund and must meet the following requirements:
(a)          for each Australian or Australian/overseas fund, a life insurer must make a separate valuation of policy liabilities for each class of life insurance business to which the fund relates, each category of business within such a class and each subcategory of business within such a category; and
(b)          for each overseas fund, a life insurer must make a separate valuation of policy liabilities for each class of life insurance business to which the fund relates and each category of business within such a class.
17.         To apply the requirements in paragraph 16 of this Prudential Standard, where a policy includes benefits referable to more than one statutory fund, class of life insurance business, category or subcategory of business, a life insurer must unbundle the benefits and treat them as if they were stand-alone policies.
18.         Participating business with insurance riders must not be unbundled, where the profits on the riders are deemed to be in respect of participating business and so allocated between policyholders and shareholders.
19.         Where a life insurer writes non-participating risk business in both the ordinary and superannuation classes of life insurance business within a single statutory fund, the life company may group these classes when valuing the relevant policy liabilities, provided that income tax attributable to shareholder profit on the business is calculated at the same tax rate for both classes.

Part B – Valuation of policy liabilities for friendly society business, life insurer non-participating business and life insurer participating business

Friendly society business
20.         The policy liabilities (gross and reinsured) of an approved benefit fund must be determined in accordance with Australian Accounting Standards, subject to any variations necessary to meet the requirements in paragraphs 21 to 28 of this Prudential Standard.
21.         Where a policy includes benefits referable