Document ID: chunk:federal_register_of_legislation:F2023L00699:body:0:p2
Version: federal_register_of_legislation:F2023L00699
Segment Type: other
Provision Reference: 
Character Range: 2926–6046

under the Act (insurer); and
(b)          Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001).
3.             Where a requirement applies to a Level 2 insurance group, the requirement is imposed on the parent entity of the Level 2 insurance group.
4.             This Prudential Standard applies to insurers and Level 2 insurance groups (regulated institutions) and commences on 1 July 2023.

Interpretation
5.             Terms that are defined in GPS 001 appear in bold the first time they are used in this Prudential Standard.

Valuation of insurance liabilities
6.             An insurer must value its insurance liabilities in accordance with this Prudential Standard, whether or not the insurer is required to have an Appointed Actuary. The valuation must then be used for the purpose of:
(a)          calculating the insurer's prescribed capital amount in accordance with the capital standards; and
(b)          completing the insurer's yearly statutory accounts in accordance with reporting standards made under the Collection of Data Act.
7.             Requirements for the measurement and reporting of insurance liabilities for Level 2 insurance groups are set out in Attachment A of this Prudential Standard.
8.             An insurer must determine a value for both its outstanding claims liabilities and its premiums liabilities for each class of business underwritten by the insurer.
9.             Outstanding claims liabilities relate to all claims incurred prior to the valuation date, whether or not they have been reported to the insurer. The value of the outstanding claims liabilities must include an amount in respect of claims handling expenses. An insurer must determine the outstanding claims liabilities on a prospective basis, reflecting the ultimate payments required to settle outstanding claim obligations, both net and gross of:
(a)          reinsurance recoverables; and
(b)          non-reinsurance recoveries.
10.         Premiums liabilities relate to all future claim payments arising from future events post the valuation date that will be insured under the insurer's existing policies that have not yet expired including unclosed business. The value of the premiums liabilities must include an amount in respect of claims handling expenses and policy administration expenses and allow for expected premium refunds. In respect of premiums liabilities for which reinsurance has not yet been purchased, allowance must be made for this reinsurance in the premiums liabilities valuation (refer to paragraphs 36 to 44 of this Prudential Standard for further details on the assumptions relating to this reinsurance). Premiums liabilities are to be determined on a prospective basis, both net and gross of:
(a)          expected reinsurance recoveries; 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