Document ID: chunk:federal_register_of_legislation:F2024L00886:body:0:p8
Version: federal_register_of_legislation:F2024L00886
Segment Type: other
Provision Reference: 
Character Range: 19024–21893

to draw upon the collateral to meet the reinsurer's obligations must be enforceable in the winding-up of the life company regardless of whether or not claims have been paid by the life company;
(f)           the collateral must be available to meet the liabilities of the reinsurer under contracts of reinsurance to which the life company and the reinsurer are parties until such time as the obligations of the reinsurer have been discharged under the contracts of reinsurance. It must not be available for distribution to the reinsurer other than where:
(i)            the reinsurer has discharged its obligations under the reinsurance contract; or
(ii)         the reinsurer requests that excess assets under the collateral arrangement be released and the reinsurance contract provides for such releases.
(g)          the collateral arrangement must specify:
(i)            the types of Eligible Collateral Items that may be held and apply limits to exposures to particular asset classes (quality and counterparty exposure limits);
(ii)         a method for determining the value of assets to be held under the arrangement and must specify how any shortfall or excess is to be dealt with. The Appointed Actuary of the life company must be responsible for determining the value of the reinsured liabilities and any adjustments to the required collateral amount;
(iii)       what is to happen to cash flows arising from assets or deposits, including but not limited to interest, dividends and maturity proceeds;
(iv)        that where an asset held under the collateral arrangement ceases to be an Eligible Collateral Item, it will no longer be recognised as an Eligible Collateral Item for the purposes of paragraph 32.
36.         Where a life company conducts life insurance business in an overseas jurisdiction, collateral with respect to reinsurance of that business held in the overseas jurisdiction may also qualify for the treatment in paragraph 32. It will do so where:
(a)          the collateral arrangement is subject to the laws of that jurisdiction;
(b)          the seat of arbitration under the arrangement is located in a capital city in that jurisdiction;
(c)          any deposits under the arrangement are held for and are under the control of the life company with a bank, as defined in paragraph 25, in that jurisdiction; and
(d)          the requirements of paragraph 35 are otherwise met.
37.         Where the fair value of the collateral does not cover the full value of the asset, the collateral can only replace part of the asset. The remaining portion of the asset must be treated as an exposure to the underlying counterparty.
38.         Given a provider of collateral may fail to or not be required to post additional collateral in response to falls in the value of the collateral or, for a collateralised reinsurance asset, increases in