Document ID: chunk:federal_register_of_legislation:F2023L00676:reg:7:p4
Version: federal_register_of_legislation:F2023L00676
Segment Type: reg
Provision Reference: reg 7 (pt 4/5)
Character Range: 36239–39045

approve an entity as part of a life company's ELE, APRA will have regard to the following criteria in respect of the relationship between the life company and the related entity:
(a)          the related entity must be wholly owned and controlled by the life company, with a Board of directors/trustees that is comprised entirely of members of the life company's Board or senior management;
(b)          the life company must demonstrate to APRA that there are no legal or regulatory barriers (e.g. restrictions imposed by law or a regulator in a foreign jurisdiction) to the transfer of the assets back to the life company;
(c)          the life company's risk management systems and controls must apply fully to the operations of the related entity. The senior management of the life company must be in a position to monitor the operations of the related entity to the same extent as the operations of the life company itself. Systems for monitoring and maintaining control over the related entity must be included within the internal and external audit programs of the life company;
(d)          the life company must be able to furnish stand-alone accounting records for the related entity, and provide APRA with full and unfettered access to this information at any time (including during on-site visits);
(e)          where the related entity holds or invests in assets on behalf of the life company, the related entity must have no material third party liabilities, other than exempt tax liabilities and employee entitlements;
(f)           where the related entity borrows on behalf of the life company, all funds must be on-lent directly to the life company; and
(g)          the related entity must not conduct any business that the life company would otherwise be prevented from conducting under the Act.

[1]  Refer to subsection 21(1) of the Act.
[2]  Refer to section 16ZD of the Act.
[3]  Insurance policy receivables and payables also form part of the liability adjustment calculation specified in Attachment B to Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital (LPS 112).
[4]  For the purpose of calculating the result of the stress tests other than the default stress, a life company must use the adjusted policy liabilities (net of reinsurance) calculated in accordance with LPS 112 instead of the equivalent statutory account values.
[5]  For this purpose, an investment entity is an entity where the sole purpose of the entity is investment activities.
[6]  For this purpose, a trust or entity may be geared through borrowings or through the use of derivatives.
[7] In the increase scenario, the Australian dollar values of foreign currency assets and liabilities will fall by 20 per cent. In the decrease scenario, the Australian dollar values of foreign currency