Document ID: chunk:federal_register_of_legislation:F2023L00733:reg:7:p4
Version: federal_register_of_legislation:F2023L00733
Segment Type: reg
Provision Reference: reg 7 (pt 4/7)
Character Range: 34298–37121

health insurer;
(ii)         deposits held by the private health insurer in Australia, which are controlled by the private health insurer in Australia, made by the non-APRA-authorised reinsurer;
(iii)       a combination of the two forms of collateral specified in paragraphs (i) and (ii); or
(iv)        any other form of collateral as may be approved by APRA in writing in a particular case; and
(b)          if it provides effective security against liabilities arising under the reinsurance contract; and
(c)          if it is not available for distribution to creditors of the reinsurer other than the insurer in the event of the insolvency of the reinsurer.
7.             Where the fair value of the collateral does not cover the full value of the reinsurance recoverables, only that part of the value of the reinsurance recoverables that is covered by collateral may be assigned the default factor applicable to the collateral.
8.             Where a private health insurer possesses a guarantee or letter of credit in respect of the reinsurance recoverables due from a non-APRA-authorised reinsurer, the default factor to be used is that applicable to the guarantor or the issuer of the letter of credit, as the case may be. This paragraph applies only if each of the following conditions is satisfied:
(a)          the guarantor or issuer of the letter of credit is an ADI provided the entity has a counterparty grade of 1, 2 or 3;
(b)          the guarantee or letter of credit is explicit, unconditional and irrevocable;
(c)          the guarantor or issuer of the letter of credit is obliged to pay the insurer in Australia; and
(d)          the obligation of the guarantor or issuer of the letter of credit to pay the insurer is specifically linked to performance of the reinsurance contract or contracts under which the reinsurance recoverables arise.
9.             The collateral, guarantee or letter of credit referred to in paragraphs 6 to 8 of this Attachment must be effective for the expected period for payment of claims under the reinsurance contract under which the reinsurance recoverables arise. If this is impractical, the collateral, guarantee or letter of credit must be effective for a period of at least 24 months and must include a termination provision requiring the issuer to give the insurer 12 months written notice of the issuer's intention to terminate the collateral, guarantee or letter of credit.

Attachment C – Extended Licensed Entity
     1. In certain circumstances, a private health insurer may choose to hold assets in an SPV or other related entity, rather than on its own balance sheet. Where a private health insurer receives approval under paragraph 3 of this Attachment, the private health insurer will be able to determine its Asset Risk Charge based on the individual