Document ID: chunk:federal_register_of_legislation:F2024L01525:body:0:p10
Version: federal_register_of_legislation:F2024L01525
Segment Type: other
Provision Reference: 
Character Range: 26484–29572

required under Attachment B to this Prudential Standard.

Tier 2 Capital
 1.          Tier 2 Capital includes other components of capital that, to varying degrees, fall short of the quality of Tier 1 Capital but nonetheless contribute to the overall strength of a private health insurer and its capacity to absorb losses.
 2.          Tier 2 Capital consists of:
         1.           instruments issued by the private health insurer that meet:
                 1.             the criteria for inclusion in Tier 2 Capital set out in Attachment D to this Prudential Standard; and
                 2.          the requirements for loss absorption at the point of non-viability set out in Attachment E to this Prudential Standard; and
         2.           regulatory adjustments applied in the calculation of Tier 2 Capital as required under Attachment B to this Prudential Standard.

Additional Tier 1 or Tier 2 Capital issued overseas by the private health insurer
 1.          Additional Tier 1 Capital instruments and Tier 2 Capital instruments may be issued by a private health insurer, either in its country of incorporation or through a branch in another country, provided the instrument:
         1.           constitutes an obligation of the private health insurer at all times;
         2.           is freely available to absorb losses across all of the operations of the private health insurer; and
         3.           meets all of the requirements of this Prudential Standard for inclusion in Additional Tier 1 Capital or Tier 2 Capital.

Intra-group capital transactions
 1.          The matters APRA may consider in assessing whether an item included by a private health insurer as a component of capital resulting from intra-group transactions is not a genuine contribution to financial strength include, but are not limited to, whether the item:
         1.           is clearly supplied from debt raised by other group members;
         2.           results from intra-group transactions with no economic substance;
         3.           is contributed by a member of the group using funding sources, directly or indirectly, from the private health insurer itself; and
         4.           is contributed by a group member and the funding of which contains cross-default clauses that would be triggered as a result of the private health insurer failing to meet any servicing obligations.
 2.          In assessing the overall strength of the capital adequacy of a private health insurer, APRA will have regard to the level of capital adequacy of individual group members of a group to which the private health insurer belongs, including any limitations in the amount of capital that may be readily extracted from individual group members to provide support, if required, to recapitalise the private health insurer.
 3.          In assessing the overall strength of a private health insurer, APRA may request that the parent entity provide APRA with details of relevant intra-group exposures, including capital transactions and intra-group guarantees. The information on