Document ID: chunk:federal_register_of_legislation:F2023L00633:body:0:p7
Version: federal_register_of_legislation:F2023L00633
Segment Type: other
Provision Reference: 
Character Range: 17155–20580

GPS 340 Insurance Liability Valuation (GPS 340) is insufficient to cover associated net claim payments and associated claim expenses as they fall due.

                                     This must be calculated as the sum of:

                                          * Total OCL Insurance Risk Charge; and
                                          * Total PL Insurance Risk Charge.

L

Lenders mortgage insurer  This refers to whether the reporting insurer is a lenders mortgage insurer as defined in GPS 001.

O

Operational Risk Charge                                                       The Operational Risk Charge is the minimum amount of capital required to be held against operational risks. The Operational Risk Charge relates to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

                                                                              This must be determined in accordance with Prudential Standard GPS 118 Capital Adequacy: Operational Risk Charge (GPS 118).

Operational Risk Charge for inwards reinsurance business (ORCI)               This is the Operational Risk Charge relating to the reporting insurer's inwards reinsurance business. This must be calculated using the formula in accordance with GPS 118.

Operational Risk Charge for business that is not inwards reinsurance (ORCNI)  This is the Operational Risk Charge relating to business written directly by the reporting insurer. This must be calculated using the formula in accordance with GPS 118.

P

Prescribed capital amount  The prescribed capital amount must be determined in accordance with GPS 110.

                           It is calculated as the sum of:

                                * Insurance Risk Charge;
                                * Insurance Concentration Risk Charge;
                                * Asset Risk Charge;
                                * Asset Concentration Risk Charge;
                                * Operational Risk Charge; and
                                * adjustments to prescribed capital amount as approved by APRA;

                           less:

                                * aggregation benefit.

                           Where the reporting insurer is a Category D or E insurer, the prescribed capital amount is subject to a minimum of $2 million. For all other reporting insurers, the prescribed capital amount is subject to a minimum of $5 million.

R

Risk charge components  The risk charge components, have the same meaning as in, and must be calculated in accordance with, GPS 114. These are calculated by determining the fall in the capital base of the regulated institution in seven stress tests.

T

Total OCL Insurance Risk Charge  The risk charge for outstanding claims risk relates to the risk that the value of net outstanding claims liabilities (OCL) determined in accordance with GPS 340 will be insufficient to cover associated net claim payments and any associated claim expenses as they fall due.

                                 This must be determined in accordance with GPS 115.

Total PL Insurance Risk Charge   This is the Insurance Risk Charge in respect of premiums liability (PL) risk, which relates to the risk that the value of the net PL is greater than the value determined in accordance with GPS 340. It also relates to the risk that material