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Insurance (prudential standard) determination

No. 2 of 2023

Prudential Standard GPS 110 Capital Adequacy

Insurance Act 1973

I, Helen Rowell, a delegate of APRA:

    (a)          under subsection 32(4) of the Insurance Act 1973 (the Act), revoke Insurance (prudential standard) determination No. 12 of 2019, including Prudential Standard GPS 110 Capital Adequacy made under that Determination; and

    (b)          under subsection 32(1) of the Act determine Prudential Standard GPS 110 Capital Adequacy, in the form set out in the Schedule, which applies to:

        (i)                  all general insurers and authorised NOHCs; and

        (ii)                a subsidiary of a general insurer or authorised NOHC, where that subsidiary is a parent entity of a Level 2 insurance group.

This instrument commences on 1 July 2023.
Dated: 24 May 2023

[Signed]

Helen Rowell
Deputy Chair

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.

authorised NOHC has the meaning given in section 3 of the Act.

general insurer has the meaning given in section 11 of the Act.

Level 2 insurance group has the meaning given in Prudential Standard GPS 001 Definitions.

parent entity has the meaning given in Prudential Standard GPS 001 Definitions.

subsidiary has the meaning given in Prudential Standard GPS 001 Definitions.

Schedule

Prudential Standard GPS 110 Capital Adequacy, comprises the document commencing on the following page.

Prudential Standard GPS 110

Capital Adequacy
Objectives and key requirements of this Prudential Standard
This Prudential Standard requires a general insurer or Level 2 insurance group to maintain adequate capital against the risks associated with its activities.
The ultimate responsibility for the prudent management of capital of a general insurer or Level 2 insurance group rests with its Board of directors. The Board must ensure that the general insurer or Level 2 insurance group maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances.
The key requirements of this Prudential Standard are that a general insurer or Level 2 insurance group must:
     * have an Internal Capital Adequacy Assessment Process;
     * maintain required levels of capital;
     * determine its prescribed capital amount having regard to a range of risk factors that may adversely impact a general insurer or Level 2 insurance group's ability to meet its obligations. These factors include insurance risk, insurance concentration risk, asset risk, asset concentration risk and operational risk;
     * comply with any supervisory adjustment to capital imposed by APRA;
     * make certain public disclosures about the capital adequacy position of the general insurer or Level 2 insurance group;
     * seek APRA's consent for certain planned capital reductions of the general insurer or Level 2