Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p44
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 111403–114247

(to the extent these have not been deducted under sub-paragraph (b)).
The deductions relating to investments in subsidiaries, joint ventures and associates (refer to Attachment B) do not apply to investments in subsidiaries of Level 2 insurance groups. Investments in subsidiaries are treated as either consolidated subsidiaries and as a result treated as part of the Level 2 insurance group or as non-consolidated subsidiaries at Level 2.
The deductions relating to reinsurance assets, as set out in paragraphs 20 and 21 of Attachment B, do not apply to the international business of a Level 2 insurance group, unless the deduction is required in the relevant jurisdiction.
The deduction relating to assets under a fixed or floating charge, as set out in paragraphs 25 and 26 of Attachment B, do not apply to the international business of a Level 2 insurance group.
APRA may require a Level 2 insurance group to deduct from Common Equity Tier 1 Capital an amount to cover undercapitalisation of a non-consolidated subsidiary (or subsidiaries). A Level 2 insurance group may be required to provide to APRA details of, amongst other things, the:
 1. size and scale of the operations of the non-consolidated subsidiary;
 2. materiality of the subsidiary's operations to group income and strategic outlook;
 3. level of net tangible assets of the subsidiary;
 4. risk profile of the subsidiary;
 5. level of exposure of the Level 2 insurance group to the subsidiary; and
 6. size of any identified capital shortfall and the likelihood of such a shortfall being remedied within a reasonable period of time.

Intra-group capital transactions
In measuring the capital base of a Level 2 insurance group, a Level 2 insurance group must exclude any capital instrument issued by a member of the group where the obligations under that instrument are secured, guaranteed, or subject to any other arrangement provided by a member of the group that legally or economically enhances the seniority of claims of investors.
In assessing the overall capital strength of a Level 1 insurer and Level 2 insurance group, APRA may request that the parent provide APRA with details of the group's intra-group exposures, including capital transactions and intra-group guarantees. The information on intra-group exposures would typically include details of all intra-group exposures provided by the parent(s) and the Level 1 insurer to the Level 2 insurance group. APRA may also request details of material exposures between the members of the group to which the insurer belongs.

Capital support
For the purposes of determining whether a capital instrument constitutes capital support, including a guarantee provided to a related entity, APRA will have regard to, amongst other things, whether:
 1. the facility represents a recognised capital instrument or is otherwise