Document ID: chunk:federal_register_of_legislation:F2023L00672:body:0:p5
Version: federal_register_of_legislation:F2023L00672
Segment Type: other
Provision Reference: 
Character Range: 11547–14369

to NP VR in accordance with paragraph 26.

    An insurer does not need to calculate amounts for sub-paragraphs 18(a)(i) and 18(a)(ii) if it is able to demonstrate that one of these amounts is expected to be materially lower than the amount determined for the other.
19.         Subject to paragraphs 9 and 12, NP VR must be calculated and reported to APRA as at each reporting date. The calculation of NP VR, at a reporting date, must take into account the reinsurance program in place for the next reporting period. The NP VR calculation at each reporting date must only include potential reinsurance recoverables that were contractually agreed on or before the reporting date.
20.         An insurer must regularly monitor the level of NP VR during the reporting period, including determining the impact of a catastrophic event. Where an event occurs during the reporting period, the insurer must determine the impact of that event on the level of the NP VR. Any changes made to the NP VR as a result of the catastrophic event are then to be applied until the end of the current reinsurance treaty or the occurrence of another event that impacts the NP VR, whichever occurs first.

NP PML
21.         An insurer that has exposures to natural perils must determine a Probable Maximum Loss (PML) for its portfolio (NP PML). NP PML is the gross loss arising from the occurrence of a single event, where that loss is not less than the whole-of-portfolio annual loss with a 0.5 per cent probability of occurrence. NP PML must not include any allowance for potential reinsurance recoverables. The calculation of NP PML must include:
(a)          the impact of the event on all classes of business of the insurer;
(b)          an allowance for non-modelled perils[5]; and
(c)          potential growth in the insurer's portfolio.

NP reinsurance recoverables
22.         An insurer that has exposures to natural perils must determine the level of potential reinsurance recoverables should there be the occurrence of the event that gives rise to NP PML (NP reinsurance recoverables). NP reinsurance recoverables must not include any amounts due from aggregate reinsurance cover.

Net whole-of-portfolio loss
23.         An insurer that has exposures to natural perils must determine the net loss[6] arising from the occurrence of a single event, where that net loss is not less than the whole-of-portfolio annual net loss with a 0.5 per cent probability of occurrence (net whole-of-portfolio loss).

NP reinstatement premiums
24.         An insurer that writes reinsurance may receive inwards reinstatement premiums from cedants as a result of the event that gives rise to its NP PML or the net whole-of-portfolio loss determined in paragraph 23, as appropriate (NP reinstatement premiums). NP reinstatement premiums must only