Document ID: chunk:federal_register_of_legislation:F2023L00682:body:0:p2
Version: federal_register_of_legislation:F2023L00682
Segment Type: other
Provision Reference: 
Character Range: 2782–5911

to capital imposed by APRA;
     * make certain public disclosures about the capital adequacy position of the general insurer or Level 2 insurance group;
     * seek APRA's consent for certain planned capital reductions of the general insurer or Level 2 insurance group; and
     * inform APRA of any significant adverse changes in the general insurer or Level 2 insurance group's capital position.

Table of Contents
Authority
Application and commencement
Interpretation
Responsibility for capital management
Internal Capital Adequacy Assessment Process
Capital base
Prudential Capital Requirement
Standard Method
Supervisory adjustment
Reductions in capital base
Materiality
Notification requirements
Adjustments and exclusions
Previous exercise of discretion
Attachment A – Run-off plan
Matters to be included in a run-off plan

Authority

     1. This Prudential Standard is made under section 32 of the Insurance Act 1973 (the Act).

Application and commencement

    2.             This Prudential Standard applies to each:

       (a)          general insurer authorised under the Act (insurer); and

       (b)          Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001).

    Where a requirement applies to a Level 2 insurance group, the requirement is imposed on the parent entity of the Level 2 insurance group.

    3.             This Prudential Standard applies to insurers and Level 2 insurance groups (regulated institutions) from 1 July 2023.

Interpretation
4.             Terms that are defined in GPS 001 appear in bold the first time they are used in this Prudential Standard.

Responsibility for capital management
5.             Capital is the cornerstone of a regulated institution's financial strength. It supports a regulated institution's operations by providing a buffer to absorb unanticipated losses from its activities and, in the event of such losses, enables the regulated institution to continue to meet its insurance obligations.
6.             As a consequence of the key role played by capital in the financial strength of a regulated institution, the Board of a regulated institution must ensure that the regulated institution has capital that is adequate for the scale, nature and complexity of its business and its risk profile, such that it is able to meet its obligations under a wide range of circumstances.
7.             In addition to the requirements in paragraph 6, the Board of the parent entity of a Level 2 insurance group must also have regard to:
       (a)          the potential for risk to compound across the group;
       (b)          concentration of capital and risk within individual entities in the group;
       (c)          guarantees and other commitments between entities in the group;
       (d)          the capital needs of individual entities in the group;
       (e)          the nature of capital held by the group, including its maturity, servicing costs and any double counting of capital within the group; and
       (f)           the ability to readily transfer surplus or free capital within the group and