Document ID: chunk:federal_register_of_legislation:F2023L00690:reg:7:p8
Version: federal_register_of_legislation:F2023L00690
Segment Type: reg
Provision Reference: reg 7 (pt 8/9)
Character Range: 47444–50458

contingent on the tax benefits being absorbed by deferred tax liabilities of entities outside the Level 2 insurance group;

Currency stress
       (b)          Level 2 insurance groups must make all consolidation adjustments for intra-group arrangements before applying the currency stress outlined in this Prudential Standard;

Default stress
       (c)          Level 2 insurance groups must make all consolidation adjustments for intra-group arrangements before applying the stress outlined in this Prudential Standard; and

       (d)          The modification to the default stress relating to reinsurance recoverables from non-APRA-authorised reinsurers, as set out in paragraphs 74, 75 and 76 of this Prudential Standard, does not apply to the reinsurance recoverables of the international business of the Level 2 insurance group.[12]

    2.             A Level 2 insurance group must consult with APRA prior to entering into a material securitisation transaction in order to reduce the Asset Risk Charge.

    3.             A Level 2 insurance group may use a best endeavours basis to determine the identification of asset or counterparty exposures for international business. The best endeavours basis must use information held by entities within the Level 2 insurance group, or otherwise publicly available information, in a manner consistent with the group's documented credit risk management policies.

[1]  The effective exposure of an insurer's assets and liabilities must also include the regulatory adjustments to Common Equity Tier 1 Capital to allow for the effects of accounts receivable and accounts payable outlined in Attachment B of GPS 112, but gross of any tax effects.
[2]  For the purpose of calculating the result of the stress tests other than the default stress, a regulated institution must use the net insurance liabilities calculated in accordance with Prudential Standard GPS 340 Insurance Liability Valuation (GPS 340) instead of the equivalent statutory account values.
[3]  For this purpose, an investment entity is an entity where the sole purpose of the entity is investment activities.
[4]  For this purpose, a trust or entity may be geared through borrowings or through the use of derivatives.
[5]  In the increase scenario, the Australian dollar values of foreign currency assets and liabilities will fall by 20 per cent. In the decrease scenario, the Australian dollar values of foreign currency assets and liabilities will increase by 33.3 per cent.
[6]  and other non-securitised assets including covered bonds issued by an ADI.
[7]  Unsecured loans that have a 100 per cent default factor applied in accordance with paragraph 72 are not subject to credit spreads stress, real interest rates stress, expected inflation stress and currency stress.
[8]  For a claims-made policy, the reference to "event" is to the date a claim notification was made. Novated contracts are regarded as incepting at the time specified in the contract they replaced, except where a