Document ID: chunk:federal_register_of_legislation:F2023L00608:front:0:p8
Version: federal_register_of_legislation:F2023L00608
Segment Type: other
Provision Reference: 
Character Range: 21820–25285

accordance with GPS 340.  The diversified risk margin refers to the risk margin that has been applied to the class of business after allowance for diversification across the whole insurance portfolio.

Net PL - expected reinsurance recoveries (central estimate)                          This is the value of expected reinsurance recoveries receivable by the reporting insurer associated with the central estimate of PL, gross of any provisions for depreciation or impairment. It is determined in accordance with GPS 340.

Net PL - non-reinsurance recoveries (central estimate)                               This is the value of recoveries under arrangements, other than reinsurance arrangements, receivable by the reporting insurer associated with the central estimate of PL, gross of any provisions for depreciation or impairment. It is determined in accordance with GPS 340. Recoveries to be included at this item include salvage, subrogation, and input tax credit recoveries, amongst others.

Net PL - stand-alone risk margin                                                     This is the value, as at the relevant date, of the stand-alone risk margin component of the net PL, net of any expected reinsurance and non-reinsurance recoveries, determined in accordance with GPS 340. The stand-alone risk margin refers to the risk margin that would be applied to a class of business where no allowance for diversification with other classes of business has been allowed.

Net PL - total                                                                       This is the total of the central estimate (including claims handling expenses, including policy admin expenses) and diversified risk margin for PL, net of any expected reinsurance and non-reinsurance recoveries.

                                                                                     It is calculated as the sum of:

                                                                                          * net PL - central estimate (including CHE and PAE); and
                                                                                          * net PL - diversified risk margin.

Net written premium for material business that incepts in the next reporting period  This is the value of future net written premium income for contracts for which the insurer is already committed that will expose the insurer to material risks in the subsequent relevant period, but are not otherwise recognised within the capital requirements. This premium income is net of: levies that are included in the gross premium and would be payable on the business (in particular fire service levy); reinsurance costs that would arise in respect of the premium income and would be payable under treaty arrangements to protect the business; and commission that would be payable to secure the business once it is written (such as brokerage or reinsurance exchange commission).

                                                                                     Typically this will be for policies for which a written premium is not yet recognised under accounting standards, and have not been included in the PL, but for which the insurer has already committed to cover.

                                                                                     The materiality of the business that incepts in the next reporting period should be determined in accordance with the Australian Accounting and Auditing