Document ID: chunk:federal_register_of_legislation:F2023L00684:body:0:p43
Version: federal_register_of_legislation:F2023L00684
Segment Type: other
Provision Reference: 
Character Range: 108744–111670

its prescribed capital amount.

Additional Tier 1 Capital
In addition to paragraph 38 of this Prudential Standard, Additional Tier 1 Capital of a Level 2 insurance group includes instruments issued by a fully consolidated subsidiary of the parent entity of the Level 2 insurance group and held by third parties where:
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                 1. the instruments would, if issued by the parent entity of the Level 2 insurance group, meet the criteria in Attachment C; and
                 2. the instruments meet the requirements for loss absorption at the point of non-viability set out in Attachment E.

Tier 2 Capital
In addition to paragraph 41 of this Prudential Standard, Tier 2 Capital of a Level 2 insurance group includes instruments issued by a fully consolidated subsidiary of the parent entity of the Level 2 insurance group and held by third parties where:
 1. the instruments would, if issued by the parent entity of the Level 2 insurance group, meet the criteria in Attachment D; and
 2. the instruments meet the requirements for loss absorption at the point of non-viability set out in Attachment E.

Regulatory adjustments to Common Equity Tier 1 Capital
In addition to the regulatory adjustments to Common Equity Tier 1 Capital in Attachment B, a Level 2 insurance group must deduct from Common Equity Tier 1 Capital:
 1. any surplus, net of deferred tax liabilities, in any defined benefit superannuation fund of which an insurer or other group entity is an employer-sponsor unless otherwise approved by APRA. Any excluded surplus must reverse any associated deferred tax liability from Common Equity Tier 1 Capital;
 2. equity exposures and other capital investments[48] in non-consolidated subsidiaries or controlled entities, whether regulated or unregulated, subject to the materiality of the controlled entity (to be determined in consultation with APRA).[49] This deduction does not apply to a controlled entity, where it acts as a holding company for pass-through of equity exposures and other capital investments in Level 1 insurers or equivalent overseas entities carrying on insurance business. In the event that a controlled entity holds equity exposures and other capital investments in controlled entities not eligible for consolidation, the Level 2 insurance group must deduct its equity exposures and other capital investments in the holding company net of the value of the holding company's investment in any Level 1 insurer or equivalent overseas entities carrying on insurance business; and
 3. goodwill and any other intangible component of the investments in non-consolidated subsidiaries (to the extent these have not been deducted under sub-paragraph (b)).
The deductions relating to investments in subsidiaries, joint ventures and associates (refer to Attachment B) do not apply to investments in subsidiaries of Level 2 insurance groups. Investments in