Document ID: chunk:federal_register_of_legislation:F2023L00671:body:0:p4
Version: federal_register_of_legislation:F2023L00671
Segment Type: other
Provision Reference: 
Character Range: 8566–11500

any exposure which is not subject to the Asset Concentration Risk Charge must be subject to the Asset Risk Charge.
16.         If a look-through basis has been used for assets under GPS 114, the same look-through basis must be used for the purposes of this Prudential Standard.
17.         For Category C insurers, the Asset Concentration Risk Charge must be applied to the assets in Australia only of the Category C insurer, consistent with reporting standards made under the Financial Sector (Collection of Data) Act 2001.

Asset Concentration Risk Charge calculation
18.         The Asset Concentration Risk Charge for each exposure of a regulated institution to a particular asset, counterparty or group of related counterparties is the amount by which this exposure exceeds the limits set out in Attachment A.  Separate treatment applies for reinsurance exposures and non-reinsurance exposures. A differing treatment also applies for collateral, guarantees and reinsurance recoverables due from non-APRA-authorised reinsurers as set out in paragraphs 22 to 34.
19.         For non-reinsurance exposures to unrelated parties that are part of an APRA-regulated group (Table 2(c) of Attachment A), the Asset Concentration Risk Charge is calculated as the maximum amount after applying each of the sub-limits to the relevant exposures.
20.         In the case of reinsurance exposures (both on-balance and off-balance sheet) to a group of related counterparties, exposures need to be compared and aggregated against each of the limits in Table 1 of Attachment A. This means that:
       (a)          reinsurance exposures within the group that have a counterparty grade of 5 or below are compared to the limit (Table 1(c)) and an amount is determined;

       (b)          reinsurance exposures of grade 5 and below that are not part of the calculation in sub-paragraph (a) are then added with those with a counterparty grade of 4 and compared to the limit (Table 1(b)), and a further amount is determined; and

       (c)          reinsurance exposures of grade 4 and below that are not part of the calculation in sub-paragraphs (a) or (b) are then added to those with a counterparty grade above 4 and compared to the limit (Table 1(a)).

    The total Asset Concentration Risk Charge for the reinsurance exposure is the sum of the amounts from each sub-paragraph above.
21.         The total Asset Concentration Risk Charge is the sum of each resulting risk charge for each exposure of the regulated institution.

Treatment of collateral and guarantees as risk mitigants
22.         A regulated institution that holds certain types of collateral against an asset, or where the asset has been guaranteed, as a means of reducing risk may apply a different approach to determining the Asset Concentration Risk Charge for that asset. Where the assets in question are reinsurance recoverables due from non-APRA-authorised reinsurers,