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Life Insurance (prudential standard) determination

No. 1 of 2024

Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital

Life Insurance Act 1995

I, Clare Gibney, a delegate of APRA:

    (a)          under subsection 230A(5) of the Life Insurance Act 1995 (the Act) REVOKE Life Insurance (prudential standard) determination No. 7 of 2023, including Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital made under that determination; and

    (b)          under subsection 230A(1) of the Act DETERMINE Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital, which applies to all life companies, including friendly societies.

This instrument commences on 1 October 2024.
Dated: 9 July 2024

Clare Gibney
Executive Director
Policy and Advice Division

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.

friendly society has the meaning given in section 16C of the Act.

life company has the meaning given in the Schedule to the Act.

Schedule

Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital, comprises the document commencing on the following page.

Prudential Standard LPS 112

Capital Adequacy: Measurement of Capital
Objectives and key requirements of this Prudential Standard
This Prudential Standard sets out the characteristics that an instrument must have to qualify for inclusion in the capital base of a life company and the various regulatory adjustments to be made to determine the capital base for each statutory fund, the general fund and the life company as a whole.
The ultimate responsibility for ensuring that the capital base of a life company and the capital bases of all of its funds meet the requirements of this Prudential Standard rests with its Board of directors.
The key requirements of this Prudential Standard are that a life company must:
     * comply with minimum requirements regarding the size and composition of the capital base for the life company as a whole and for each of its funds;
     * include in the appropriate category of capital (i.e. Common Equity Tier 1 Capital, Additional Tier 1 Capital or Tier 2 Capital) only those capital instruments that meet the detailed criteria for that category;
     * ensure all capital instruments are capable of bearing loss; and
     * make certain regulatory adjustments to capital, mainly from Common Equity Tier 1 Capital, to determine the capital base.

Table of Contents
Authority
Application and commencement
Adjustments and exclusions
Previous exercise of discretion
Interpretation
Definitions
Capital base of a life company
Common Equity Tier 1 Capital
Additional Tier 1 Capital
Tier 2 Capital
Additional Tier 1 or Tier 2 Capital issued overseas by the life company
Intra-group capital transactions
Holding of capital instruments in group members by other group members
Capital base of a statutory fund
Capital base of a general fund
Attachment A - Criteria for classification