Document ID: chunk:federal_register_of_legislation:F2023L00671:body:0:p7
Version: federal_register_of_legislation:F2023L00671
Segment Type: other
Provision Reference: 
Character Range: 16675–19615

or contracts under which the reinsurance recoverables arise.

32.         Except in the case of a Category E insurer, a guarantee or letter of credit provided to a regulated institution by its parent entity or other related entity is not eligible for the treatment provided for in paragraph 31.
33.         The collateral, guarantee or letter of credit referred to in paragraphs 28 and 31 must be effective for the expected period for payment of claims under the reinsurance contract under which the reinsurance recoverables arise. If this is impractical, the collateral, guarantee or letter of credit must be effective for a period of at least 24 months but be renegotiable each year to allow at least 12 months to identify alternative arrangements if the collateral, guarantee or letter of credit cannot be renegotiated.
34.         A regulated institution may elect to not apply the treatment for reinsurance recoverables from non-APRA-authorised reinsurers in paragraphs 28 and 31 and instead apply the counterparty grade of the non-APRA-authorised reinsurer in order to determine the Asset Concentration Risk Charge. APRA may require a institution to apply a specified treatment to reinsurance recoverables from non-APRA-authorised reinsurers supported by collateral, guarantee or letter of credit, rather than the treatment that would otherwise apply under this paragraph.

Adjustments and exclusions
35.         A regulated institution may apply to APRA to vary the application of the limits in Attachment A. In deciding whether to grant the application, APRA will have regard to the type of exposure, the term of the exposure, the ability for the institution to mitigate the Asset Concentration Risk Charge by other means and any other matters which APRA considers relevant. APRA may grant approval for such variation subject to conditions and may specify any period of time for such variation.
36.         APRA may adjust or exclude a specific requirement in this Prudential Standard in relation to a regulated institution.

Previous exercise of discretion
37.         A regulated institution must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion made by APRA under a previous version of this Prudential Standard.

Attachment A – Asset exposure limits
     1. This attachment sets out the Asset Concentration Risk Charge limits for exposures to single assets, counterparties and groups of related counterparties.

Table 1: Reinsurance exposures

     Exposure – reinsurance counterparty or group of counterparties  AUD limit
(a)  Exposures to reinsurers with a counterparty grade of 1, 2 or 3  No limit
(b)  Exposures to reinsurers with a counterparty grade of 4          50% of capital base
(c)  Exposures to reinsurers with a counterparty grade of 5, 6 or 7  25% of capital base

Table 2: Non-reinsurance exposures