Document ID: chunk:federal_register_of_legislation:F2024L00884:body:0:p10
Version: federal_register_of_legislation:F2024L00884
Segment Type: other
Provision Reference: 
Character Range: 23928–26849

the claims of policy owners and other more senior creditors in the event of winding up of the issuer; and
(d)          provide for fully discretionary capital distributions.
41.         Additional Tier 1 Capital consists of:
(a)          instruments issued by a life company that are not included in Common Equity Tier 1 Capital and which meet:
(i)            the criteria for inclusion in Additional Tier 1 Capital set out in Attachment C to this Prudential Standard; and
(ii)         the requirements for loss absorbency at the point of non-viability set out in Attachment E to this Prudential Standard; and
(b)          regulatory adjustments applied in the calculation of Additional Tier 1 Capital as required under Attachment B to this Prudential Standard.

Tier 2 Capital
42.         Tier 2 Capital includes other components of capital that, to varying degrees, fall short of the quality of Tier 1 Capital but nonetheless contribute to the overall strength of a life company and its capacity to absorb losses.
43.         Tier 2 Capital consists of:
(a)          instruments issued by the life company that meet:
(i)            the criteria for inclusion in Tier 2 Capital set out in Attachment D to this Prudential Standard; and
(ii)         the requirements for loss absorption at the point of non-viability set out in Attachment E to this Prudential Standard; and
(b)          regulatory adjustments applied in the calculation of Tier 2 Capital as required under Attachment B.

Additional Tier 1 or Tier 2 Capital issued overseas by the life company
44.         Additional Tier 1 Capital instruments and Tier 2 Capital instruments may be issued by a life company, either in its country of incorporation or through a branch in another country, provided the instrument:
(a)          constitutes an obligation of the life company at all times;
(b)          is freely available to absorb losses across all of the operations of the life company; and
(c)          meets all of the requirements of this Prudential Standard for inclusion in Additional Tier 1 Capital or Tier 2 Capital.

Intra-group capital transactions
45.         The matters APRA may consider in assessing whether an item included by a life company as a component of capital resulting from intra-group transactions is not a genuine contribution to financial strength include, but are not limited to, whether the item:
(a)          is clearly supplied from debt raised by other group members;
(b)          results from intra-group transactions with no economic substance;
(c)          is contributed by a member of the group using funding sourced, directly or indirectly, from the life company; and
(d)          is contributed by a group member and the funding of which contains cross-default clauses that would be triggered as a result of the life company failing to meet any servicing obligations.
46.         In assessing the overall strength of the