Document ID: chunk:federal_register_of_legislation:F2023L00640:body:0:p8
Version: federal_register_of_legislation:F2023L00640
Segment Type: other
Provision Reference: 
Character Range: 19407–22784

event; and
                                 * H3 reinstatement cost;

                             less:

                                 * H3 reinsurance recoverables;
                                 * H3 aggregate offset; and
                                 * H3 reinstatement premiums.

H3 reinstatement cost        The Level 2 insurance group is not required to determine a H3 reinstatement cost after the third event.

                             H3 reinstatement cost is the cost (if any) of reinstating catastrophe reinsurance cover after the occurrence of the first two H3 losses. The cost (if any) must reflect the cost of reinstating reinsurance cover up to the size of the third 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 H3 reinstatement cost is calculated as the sum of:

                                 * first event; and
                                 * second event.

H3 reinstatement premiums    H3 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 H3 losses. H3 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 H3 reinstatement premiums is calculated as the sum of:

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

H3 reinsurance recoverables  H3 reinsurance recoverables are the level of potential reinsurance recoverables should there be the occurrence of three H3 losses over the catastrophe reinsurance program treaty year. H3 reinsurance recoverables must not include any amounts due from aggregate reinsurance cover.

                             The total H3 reinsurance recoverables is calculated as the sum of:

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

H3 requirement               The H3 requirement is calculated as the total over the three events for H3 loss per event.

H4 aggregate offset          H4 aggregate offset is the amount of potential reinsurance recoverables from aggregate reinsurance cover. The Level 2 insurance group must not allow for any reinstatements of aggregate reinsurance cover 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.