Document ID: chunk:federal_register_of_legislation:F2023L00733:front:0:p3
Version: federal_register_of_legislation:F2023L00733
Segment Type: other
Provision Reference: 
Character Range: 5491–8282

and liabilities. Some assets and liabilities may be impacted by more than one of the seven stress tests and will need to be considered in each relevant stress test. For the stresses in (a), (b) and (c), the impact on the capital base will be two separate amounts and these need to be included in the aggregation formula.
11.         For the purposes of paragraph 10, no risk charge component may be negative and, therefore, if there is no fall in the capital base of a fund due to the application of the stresses, the risk charge component is assumed to be zero.

Tax benefits
12.         The risk charge component for each stress test must be calculated so that no value is attributed to any tax benefits that may result from the stress test. However, tax benefits may reduce the prescribed capital amount by the aggregate amount of any insurance and asset tax benefits that can be netted against deferred tax liabilities. This reduction occurs in Prudential Standard HPS 110 Capital Adequacy (HPS 110).

Assets and liabilities to be stressed
13.         In determining each risk charge component, a private health insurer must include the effective exposure[1] of a fund's assets and liabilities to each of the risks if the exposure is impacted by the stress test. Some assets and liabilities may have effective exposures to multiple risks.
14.         Investment income receivables must be included with the asset that generated the income and then subject to the appropriate stress tests.
15.         The following assets and liabilities must not be stressed:
(a)          assets whose value must be deducted from the capital base in Prudential Standard HPS 112 Capital Adequacy: Measurement of Capital (HPS 112) (e.g. goodwill in subsidiaries); and
(b)          any part of assets in excess of the asset concentration limits specified in Prudential Standard HPS 117 Capital Adequacy: Asset Concentration Risk Charge.
16.         In addition to paragraph 15, a private health insurer that is an employer sponsor of a defined benefit superannuation fund does not need to reassess any deficit in a fund as a result of the seven stress tests, unless the private health insurer has provided a guarantee in relation to the benefits.
17.         The private health insurer must apply the stress tests to the fair value of each of the fund's assets. A private health insurer may measure its non-financial assets, short term receivables and intercompany receivables and payables using the requirements in Australian Accounting Standards rather than fair value. The risk charge component for each asset is the value reported in the private health insurer's statutory accounts[2] less the sum of the stressed value of the assets in each fund.

Off-balance sheet exposures
18.         A fund may be