Document ID: chunk:federal_register_of_legislation:F2018L00243:body:0:p4
Version: federal_register_of_legislation:F2018L00243
Segment Type: other
Provision Reference: 
Character Range: 8512–11602

the contract may be terminated;
(k)          in the case of a reinsurance contract that was not in force at the end of the financial year - the date on which the contract ceased to be in force; and
(l)            whether the contract contains terms that would require the life company to seek APRA's prior approval under this Prudential Standard and a statement regarding whether such approval has been applied for and granted.

Attachment B - Referable Reinsurance Arrangements

Definition of Referable Reinsurance Arrangements
     1. Referable Reinsurance Arrangements typically:
(a)          do not involve significant transfer of insurance risk; and/or
(b)          involve significant financing elements.
    An arrangement may involve one contract, or a combination of two or more individual contracts and/or side letters or other forms of agreement.
2.             An arrangement may be a Referable Reinsurance Arrangement even if there is significant risk transfer on commencement, if there are features of the arrangement that act to limit the extent of risk transfer at certain points over the life of the contract, or on the happening of certain contingencies. Arrangements with significant risk transfer that also include  significant financing elements are also likely to be Referable Reinsurance Arrangements, including arrangements where the reinsurer funds a share of the insurer's acquisition expenses that exceeds the share of the insurer's gross claims ceded to the reinsurer.
3.             Referable Reinsurance Arrangements are often characterised by requirements placed on the life company to limit loss experienced by the reinsurer over a certain period of time. This may include arrangements designed to allow the reinsurer to achieve a specified level of return or benefit from the contract regardless of actual experience. This may be relevant where there are contingent events that could lead to the early termination of the reinsurance arrangement, particularly if there is provision for the subsequent recapture of the business transferred.  The matters listed in paragraph 7 of this Attachment provide further guidance on factors that could indicate the existence of a Referable Reinsurance Arrangement.
4.             While the main purpose of such arrangements is usually financing, Referable Reinsurance Arrangements can be used to affect the presentation of financial results. This can lead to a misrepresentation of the true financial position of the life company that may ultimately pose risks to policy owners.

Applications for approval of Referable Reinsurance Arrangements
5.             At a minimum, the application for approval must include:
(a)          a draft contract wording or other draft proposed agreement and collateral or 'side' agreements, and any other documentation or information relevant to the transaction (including a written description of any verbal understandings and/or undertakings that are material to the operation of the arrangement);[6]
(b)          details of the proposed accounting treatment and the effect of the