Document ID: chunk:federal_register_of_legislation:F2023L00699:body:0:p3
Version: federal_register_of_legislation:F2023L00699
Segment Type: other
Provision Reference: 
Character Range: 5746–8737

and
(b)          non-reinsurance recoveries.
11.         Reinsurance recoverables and expected reinsurance recoveries should not be reduced for the risk of non-performance of the reinsurer as the risk of non-performance is considered in Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge (GPS 114).
12.         The value of outstanding claims liabilities and premiums liabilities must not include any Government charges imposed such as levies, duties and taxes. Also, acquisition expenses should not be reported as part of the value of outstanding claims liabilities or premiums liabilities valued under this Prudential Standard.
13.         Premiums liabilities relating to insurance and reinsurance contracts written on a long-term (or continuous) basis, with the option for the party accepting the risk to cancel the contract prior to the expiry date, must make allowance for future claims anticipated to arise from risks covered up to the next possible cancellation date[1]. For instance, a multi-year contract may be written on the basis that it may be cancelled by the risk carrier on a particular date (cancellation date) or within a particular period (so that the earliest cancellation date may be determined). In this case, the insurer or reinsurer would need to account for premiums liabilities for any unexpired risks which may:
(a)          arise up to and including the cancellation date; or
(b)          remain after the cancellation date.
14.         In determining the value for outstanding claims liabilities and premiums liabilities, an insurer must determine a value for the central estimate and associated risk margin by class of business (subject to considerations of materiality and the professional judgement of the Appointed Actuary). The insurer must therefore calculate and report separately to APRA, and by class of business, central estimates and risk margins for outstanding claims liabilities and premiums liabilities.[2] However, this should not prevent analysis being undertaken on a basis which is more suitable, taking into account the nature of the data and the particular circumstances of the insurer.
15.         The valuation of insurance liabilities reflects the individual circumstances of the insurer. In any event, the minimum value of insurance liabilities must be the greater of a value that is:
(a)          determined on a basis that is intended to value the insurance liabilities of the insurer at a 75 per cent level of sufficiency; and
(b)          the central estimate plus one half of a standard deviation above the mean for the insurance liabilities of the insurer.
16.         The principles of this Prudential Standard must be applied to the calculation of both gross and net insurance liabilities.

The central estimate
17.         The central estimate is intended to reflect the mean value in the range of possible values for the outcome (that is, the mean of the distribution of probabilistic outcomes). The determination