Document ID: chunk:federal_register_of_legislation:F2023L00673:body:0:p1
Version: federal_register_of_legislation:F2023L00673
Segment Type: other
Provision Reference: 
Character Range: 0–3103

Life Insurance (prudential standard) determination

No. 6 of 2023

Prudential Standard LPS 110 Capital Adequacy

Life Insurance Act 1995

I, Helen Rowell, a delegate of APRA:

    (a)          under subsection 230A(5) of the Life Insurance Act 1995 (the Act) revoke Life Insurance (prudential standard) determination No. 2 of 2012, including Prudential Standard LPS 110 Capital Adequacy made under that Determination; and

    (b)          under subsection 230A(1) of the Act determine Prudential Standard LPS 110 Capital Adequacy, which applies to all life companies, including friendly societies.

This instrument commences on 1 July 2023.
Dated: 24 May 2023

[Signed]

Helen Rowell
Deputy Chair

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.

friendly society has the meaning given in section 16C of the Act.

life company has the meaning given in the Schedule to the Act.

Schedule

Prudential Standard LPS 110 Capital Adequacy, comprises the document commencing on the following page.

Prudential Standard LPS 110

Capital Adequacy
Objectives and key requirements of this Prudential Standard
This Prudential Standard requires a life company to maintain adequate capital against the risks associated with its activities.
The ultimate responsibility for the prudent management of capital of a life company rests with its Board of directors. The Board must ensure that the life company maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances.
The key requirements of this Prudential Standard are that a life company must:
     * have an Internal Capital Adequacy Assessment Process;
     * maintain required levels of capital within each of its funds and for the company as a whole;
     * determine each fund's prescribed capital amount having regard to a range of risk factors that may adversely impact the company's ability to meet its obligations. These factors include insurance risk, asset risk, asset concentration risk and operational risk;
     * comply with any supervisory adjustment to capital imposed by APRA;
     * make certain public disclosures about the capital adequacy position of each fund and the company as a whole;
     * seek APRA's consent for certain planned capital reductions of the company; and
     * inform APRA of any significant adverse changes in the capital position of the company as a whole or any of its funds.

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
Disclosure
Reductions in capital base
Materiality
Notification requirements
Adjustments and exclusions
Previous exercise of discretion
Attachment A - Variable annuities
Attachment B - Combined stress scenario adjustment

Authority
     1. This Prudential Standard is made under paragraph