Document ID: chunk:federal_register_of_legislation:F2023L00678:body:0:p9
Version: federal_register_of_legislation:F2023L00678
Segment Type: other
Provision Reference: 
Character Range: 23833–26927

to 31, the insurer or insurance group, as the case may be, must submit to APRA a revised Reinsurance Statement which reflects details of the amended arrangements that are in place. If the amended Reinsurance Statement also warrants a change in the insurer's or insurance group's ReMS, the ReMS must be reviewed and amended in accordance with paragraph 21.

Limited Risk Transfer Arrangements
    45.         An insurer must submit to APRA details of all proposed 'Limited Risk Transfer Arrangements'[11] for approval prior to entering into such arrangements. Attachment A details the requirements for a submission for approval, as well as the criteria APRA will apply.

    46.         APRA may approve a Limited Risk Transfer Arrangement as either a reinsurance arrangement or a financing arrangement.

    47.         APRA will generally consider a Limited Risk Transfer Arrangement to be a reinsurance arrangement where the purpose and effect of the arrangement is to genuinely transfer significant insurance risk from the insurer to another (re)insurer.

    48.         A Limited Risk Transfer Arrangement that is approved by APRA as a reinsurance arrangement must be treated accordingly by the insurer for prudential purposes.[12]

    49.         A Limited Risk Transfer Arrangement that is approved by APRA as a financing arrangement must be accounted for by the insurer so that:

       (a)          the arrangement has a legitimate purpose and effect; and
       (b)          the arrangement will not misrepresent, or is not designed to disguise, a material risk to the insurer's current or continuing profitability, solvency or capital adequacy from any party.
    The terms and conditions of the financing arrangement will determine the appropriate accounting treatment for prudential purposes.

    Where APRA determines that a Limited Risk Transfer Arrangement is to be treated as a financing arrangement, the insurer must not treat the arrangement as reinsurance for the purpose of determining its prescribed capital amount under the capital standards or as reinsurance for any other purpose.

Adjustments and exclusions
    50.         APRA may adjust or exclude a specific requirement in this Prudential Standard in relation to a regulated institution.

Previous exercise of discretion
    51.         A regulated institution must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion made by APRA under a previous version of this Prudential Standard.

Attachment A – Limited Risk Transfer Arrangements

Definition of Limited Risk Transfer Arrangements
     1. Limited Risk Transfer Arrangements typically do not involve significant transfer of insurance risk over the life of the arrangement between the insurer and the reinsurer. An arrangement may involve one contract, or a combination of two or more individual contracts and/or side letters.

     2. Such arrangements are often characterised by requirements placed on the insurer to mitigate any loss