Document ID: chunk:federal_register_of_legislation:F2023L00634:body:0:p9
Version: federal_register_of_legislation:F2023L00634
Segment Type: other
Provision Reference: 
Character Range: 23179–26767

Charge   The LMI Concentration Risk Charge represents the net loss from the application of a prescribed three-year economic downturn scenario to any lenders mortgage insurance business. The determination of the LMI Concentration Risk Charge is based on the formulae and requirements set out in GPS 116.

N

Natural perils horizontal requirement (NP HR)  The natural perils horizontal requirement (NP HR) is calculated as the greater of:

                                                   * H3 requirement; or
                                                   * H4 requirement

                                               less:

                                                   * PL offset.

Natural perils vertical requirement (NP VR)    The natural perils vertical requirement (NP VR) is calculated as the greater of:
                                                   * NP PML less NP reinsurance recoverables; or
                                                   * net whole-of-portfolio loss;
                                               less:
                                                   * NP reinstatement premiums
                                               plus:
                                                   * NP reinstatement cost
                                               less:
                                                   * other adjustments.
Net whole-of-portfolio loss                    Net whole-of-portfolio loss is the net loss 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.

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 reinstatement cost                          NP reinstatement cost is the cost (if any) of reinstating all catastrophe reinsurance cover relating to the reinsurance recoverables determined. In determining this cost, if the insurer does not have contractually agreed rates for the reinsurance cover, the insurer must estimate the cost based on current reinsurance market conditions. The amount must not be less than the full original cost of the cover with no deduction for the expiry of time since the inception of the reinsurance arrangements unless the insurer is able to demonstrate to APRA that the amount materially overstates the cost that would prevail.

NP reinstatement premiums                      NP reinstatement premiums are applicable to insurers that write reinsurance and 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. NP reinstatement premiums must only be included in NP VR if the reinsurance contract specifically stipulates that offsetting with the cedant will occur at the time of the payment of the reinsurance claim.

NP reinsurance recoverables                    NP reinsurance recoverables is the level of potential reinsurance recoverables should there be the occurrence of the event that gives rise to NP PML. This amount must not include any amounts due from aggregate reinsurance cover.

O

OA PML                                            OA PML is the gross loss arising from the occurrence of a single event, such that the size of the loss has 0.5 per cent probability of occurrence. An insurer with exposures to accumulations of losses arising from a common