Document ID: chunk:federal_register_of_legislation:F2024L01525:body:0:p16
Version: federal_register_of_legislation:F2024L01525
Segment Type: other
Provision Reference: 
Character Range: 42607–45635

which a deduction must be made.
 3.              For the purposes of deducting from the relevant category of the capital base, a private health insurer may net any provisions against the relevant exposures or holdings, or the relevant non-defaulted exposures or holdings that represent identified losses, before making the necessary deductions from the relevant categories of capital.
 4.              A private health insurer must not recognise, for the purpose of measuring its capital adequacy, any transactions (or dealings) which have the aim of offsetting required deductions.

Holdings of own capital instruments
 1.              Unless otherwise indicated, a private health insurer must deduct from the corresponding category of capital holdings of the private health insurer's own capital instruments, whether held directly or indirectly[12], unless otherwise exempted in writing by APRA or unless eliminated under Australian Accounting Standards from the relevant category of capital. This deduction must include any capital instruments that the private health insurer could be contractually obliged to purchase and also all of the unused portion of any limit agreed with APRA under paragraph 26 of this Prudential Standard.

Regulatory adjustments to Common Equity Tier 1 Capital
 1.              A private health insurer must adjust their Common Equity Tier 1 Capital to allow for the effects of 'accounts receivables' and 'accounts payables' on the AASB 17 insurance and reinsurance contract liability (net of insurance and reinsurance contract assets and net of tax effects). 'Accounts receivables' are added to CET1 capital and 'accounts payables' are deducted from CET1 capital.
 2.              Additionally, a private health insurer must make the following deductions to determine Common Equity Tier 1 Capital.

Cash flow hedge reserve
 1.              A private health insurer must eliminate the amount of the cash flow hedge reserve that relates to the hedging of items that are not recorded at fair value on the balance sheet (including projected cash flows).[13]

Deferred tax assets and deferred tax liabilities
 1.          Subject to paragraphs 11, 12 and 13 of this Attachment, a private health insurer must deduct deferred tax assets net of deferred tax liabilities.[14]
 2.          The netting of these items must be on a consistent basis. Where deferred tax liabilities exceed deferred tax assets, the excess of deferred tax liabilities must not be added to Common Equity Tier 1 Capital (i.e. the net deduction is zero). Deferred tax assets and liabilities include any tax effects that would result from the accounts receivables and accounts payables adjustment outlined in paragraph 7 of this Attachment and the technical provisions in surplus or deficit of HPS 340 liabilities outlined in paragraph 32(f) of this Prudential Standard.
 3.          The netting of deferred tax assets and deferred tax liabilities must only be applied where the private health insurer has a legally enforceable right