Document ID: chunk:federal_register_of_legislation:F2023L00672:body:0:p19
Version: federal_register_of_legislation:F2023L00672
Segment Type: other
Provision Reference: 
Character Range: 49077–52168

able to demonstrate that the amount determined for one or more of those sub-paragraphs is always expected to be materially lower than the amount determined for one of the other sub-paragraphs.
    3.             Each component of the Insurance Concentration Risk Charge in paragraph 2 of this Attachment must be determined after consolidation of intra-group reinsurance arrangements.

    4.             The Insurance Concentration Risk Charge determined in paragraph 2 of this Attachment must not be less than zero.

    5.             A Level 2 insurance group must not make tax adjustments to the amounts calculated in paragraph 2 of this Attachment.

    6.             Where there is a change in the Level 2 insurance group's business (for example, due to a material purchase or sale of a portfolio of business) or reinsurance program (for example, due to material cancellations or additions to reinsurance layers), the Level 2 insurance group must consult with APRA to determine the approach to recalculate all applicable components of the Insurance Concentration Risk Charge in paragraph 2 of this Attachment.

    7.             In the application of paragraph 2 of this Attachment, a Level 2 insurance group must either:

       (a)          undertake the calculations by applying a regional approach where the regions are to be agreed with APRA and are expected to be consistent with the regions used for the Level 2 insurance group's accounts[28]; or

       (b)          apply to APRA to use a different method that is consistent with a whole-of-portfolio approach and achieves at least the same level of security to policyholders as the calculation of the relevant gross and net losses on a whole-of-portfolio basis. The application to APRA must include a detailed description of the method and how the resulting Insurance Concentration Risk Charge provides at least the same level of security to policyholders.

    8.             A Level 2 insurance group must not apply to APRA, under paragraph 7(b), to use an alternative method to determine the lenders mortgage insurer concentration risk charge in paragraph 2 of this Attachment.

Reinsurance arrangements
    9.             In calculating potential reinsurance recoverables in any component of the Insurance Concentration Risk Charge[29], a Level 2 insurance group may take into account:
       (a)          potential reinsurance recoverables receivable from a reinsurance arrangement to which a Level 1 insurer is a party only if the reinsurance arrangement meets the requirements of paragraphs 13 and 14 of this Prudential Standard; and

       (b)          potential reinsurance recoverables receivable from a reinsurance arrangement to which any other consolidated entity carrying on insurance business in a foreign jurisdiction is a party only if the reinsurance arrangement meets the requirements (if any) for documentation of reinsurance contracts applicable in that jurisdiction.[30]

    10.         Subject to paragraph 11 of this Attachment, a Level 2 insurance group must have, at the inception date