Document ID: chunk:federal_register_of_legislation:F2023L00709:body:0:p6
Version: federal_register_of_legislation:F2023L00709
Segment Type: other
Provision Reference: 
Character Range: 13499–16854

judgement or estimation in calculating the prescribed capital amount.

                                                              Approved adjustments are to be reported separately in the Reporting Standard GRS 111.0.G Adjustments and Exclusions highlighting the description of the adjustment given, transitional status and amount of adjustment applied. An increase in the risk charge is to be reported as a positive amount.

Aggregation benefit                                           The aggregation benefit makes an explicit allowance for diversification between asset risk and the sum of insurance risk and insurance concentration risk in the calculation of the prescribed capital amount.

                                                              This must be determined in accordance with GPS 110.
Asset Concentration Risk Charge                               The Asset Concentration Risk Charge is the minimum amount of capital required to be held against asset concentration risks. The Asset Concentration Risk Charge relates to the risk resulting from investment concentrations in individual assets or large exposures to individual counterparties or groups of related counterparties resulting in adverse movements in the reporting Level 2 insurance group's capital base.

                                                              This must be determined in accordance with Prudential Standard GPS 117 Capital Adequacy: Asset Concentration Risk Charge.
Asset Risk Charge                                             The Asset Risk Charge is the minimum amount of capital required to be held against asset risks. The Asset Risk Charge relates to the risk of adverse movements in the value of a reporting Level 2 insurance group's capital base due to credit or market risks.

                                                              This must be determined in accordance with Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge (GPS 114).
Asset Risk Charge - aggregated risk charge component          A Level 2 insurance group must calculate the risk charge components, as defined in GPS 114, by considering the impact on the capital base of the Level 2 insurance group of a range of stresses. These risk charge components are then aggregated using the formula set out in GPS 114. The result of applying the formula is defined as the Asset Risk Charge - aggregated risk charge component.

Asset Risk Charge - impact of diversification                 The Asset Risk Charge - impact of diversification relates to the recognition of diversification benefits between the asset risk charge components as set out in GPS 114.

                                                              This item must be calculated as the sum of the risk charge components less the Asset Risk Charge - aggregated risk charge component.
Asset Risk Charge - tax benefit deduction                     This represents the tax benefits deducted from the Asset Risk Charge - aggregated risk charge component as determined in accordance with GPS 114. It comprises the tax benefits resulting from the Asset Risk Charge stresses, reduced to allow for the reduction in Asset Risk Charge due to the aggregation formula.

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Insurance Concentration Risk Charge  The Insurance Concentration Risk Charge is the minimum amount of capital required to be