Document ID: chunk:federal_register_of_legislation:F2024L00886:body:0:p11
Version: federal_register_of_legislation:F2024L00886
Segment Type: other
Provision Reference: 
Character Range: 26664–29372

value of reinsurance claims incurred but not yet paid and unearned reinsurance premiums, but subject to a limit of the face amount of the guarantee or letter of credit (less any prior draw-downs);
(h)          the guarantee or letter of credit must specify the statutory fund of the life company in respect of which the guarantee or letter of credit is to apply;
(i)            the guarantee or letter of credit must allow draw-downs until such time as the guarantee or letter of credit is exhausted;
(j)            the guarantee or letter of credit must specify the date it commences and the date it expires;
(k)          the guarantor or issuer of the letter of credit must be required to make payments to a nominated account of the life company with a bank as defined in paragraph 25. The nominated bank account must be used exclusively for money that constitutes assets of the statutory fund;
(l)            upon presentation by the life company of a notice to the guarantor or issuer of the letter of credit specifying that an amount is due and payable under one or more specified contracts of reinsurance and has not been paid, the guarantor or issuer of the letter of credit is required to pay the amount due to the life company without further enquiry and within five business days;
(m)        a pro forma sight draft must be attached to the letter of credit or the guarantee which sets out the wording to be used by the life company in making a demand under the arrangement (which must include a reference to the non-payment of an amount due under the relevant reinsurance contracts covered under the arrangement).

Limitation on recognition of risk mitigants
43.         Where a statutory fund has a reinsurance arrangement with a reinsurer that is not a registered life company, a maximum of 50% of the stressed reinsurance assets held in respect of that reinsurer (after applying netting according to paragraph 28) can be treated as an exposure to eligible collateral, guarantors or issuers of letters of credit. If APRA is of the view that the stressed reinsurance assets do not adequately reflect a fund's overall risk exposure to reinsurers that are not registered life companies, APRA may, in writing, adjust the asset concentration risk charge calculation for that fund. If such an adjustment is applied to a fund under this paragraph, a life company must comply with the adjusted calculation. Such an adjustment could be made to a fund whose stressed reinsurance assets are reduced through the use of netting arrangements.
44.         Where a statutory fund has a reinsurance arrangement with a reinsurer that is:
(a)          an affiliated entity of the life company that APRA has approved