Document ID: chunk:federal_register_of_legislation:F2023L00634:body:0:p7
Version: federal_register_of_legislation:F2023L00634
Segment Type: other
Provision Reference: 
Character Range: 16895–20242

the cost of reinstating reinsurance cover up to the size of the third event. 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 the reinsurance market conditions that would prevail after the occurrence of the events. 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 in the market after the occurrence of the events.

                             The total H3 reinstatement cost is calculated as the sum of:

                                 * first event; and
                                 * second event.

H3 reinstatement premiums    H3 reinstatement premiums are applicable to insurers that write reinsurance and may receive inwards reinstatement premiums from cedants as a result of the events that give rise to three H3 losses. H3 reinstatement premiums must only be included in NP HR if the reinsurance contract specifically stipulates that offsetting with the cedant will occur at the time of the payment of the reinsurance claim.

                             The total H3 reinstatement premiums is calculated as the sum of:

                                 * first event;
                                 * second event; and
                                 * third event.

H3 reinsurance recoverables  H3 reinsurance recoverables are the level of potential reinsurance recoverables should there be the occurrence of three H3 losses over the catastrophe reinsurance program treaty year. H3 reinsurance recoverables must not include any amounts due from aggregate reinsurance cover.

                             The total H3 reinsurance recoverables is calculated as the sum of:

                                 * first event;
                                 * second event; and
                                 * third event.

H3 requirement               The H3 requirement is calculated as the total over the three events for H3 loss per event.

H4 aggregate offset          H4 aggregate offset is the amount of potential reinsurance recoverables from aggregate reinsurance cover. The insurer must not allow for any reinstatements of aggregate reinsurance cover unless these have been contractually agreed with the reinsurer(s). If reinstatements are included, the cost of reinstatement must be netted from the offset. The insurer must agree with APRA a methodology for the determination of this adjustment.

                             This methodology may allow for any portion of paid and outstanding claims and PL that contribute to the insurer's retained losses for the purposes of the retention on any aggregate reinsurance cover, provided it does not result in a double-count between this offset and the PL offset.

                             The total H4 aggregate offset is calculated as the sum of:

                                 * first event;
                                 * second event;
                                 * third event; and
                                 * fourth event.

H4 loss per event            The H4 loss per event is calculated for each H4 event as