Document ID: chunk:federal_register_of_legislation:F2024L00884:body:0:p41
Version: federal_register_of_legislation:F2024L00884
Segment Type: other
Provision Reference: 
Character Range: 105082–108165

2 Capital instrument must provide that, on conversion or write-off of the instrument upon a non-viability event, any residual claims associated with the portion of the instrument converted or written off, are not senior to claims associated with ordinary shares or mutual equity interests of the life company and not senior to claims associated with ordinary shares or mutual equity interests of the parent entity.
18.         A life company must notify APRA, if the life company anticipates that:
(a)          the life company may be exposed to the occurrence of a non-viability event; or
(b)          the life company may be subject to a non-viability event contained in non-viability requirements imposed by a home regulator or statute upon the life company's foreign parent.

Attachment F - Definition of Adjusted Policy Liabilities

Non-participating benefits
     1. For each statutory fund, the adjusted policy liabilities for non-participating benefits without entitlement to discretionary additions are the greater of:
(a)          the total risk-free best estimate liability (RFBEL) for all policies; and
(b)          the total termination values for all policies.
2.             For each statutory fund, the adjusted policy liabilities for non-participating benefits with entitlement to discretionary additions are the greater of:
(a)          the total RFBEL for all policies; and
(b)          the total termination values plus, if it is greater than zero, the investment fluctuation reserve (IFR).
    The 'greater of' must be determined at sub-group level if the policy benefits for a sub-group of policies are determined by reference to the performance of particular assets that the life company has allocated to the liabilities for that sub-group.
3.             The adjusted policy liabilities must be increased if the amount determined using the formula above would be insufficient to meet all guarantees and obligations implied by the promotional material of the company, and policy owners' reasonable benefit expectations based on past company practice.

Definition of RFBEL
4.             For both life insurance contracts and life investment contracts, the RFBEL is determined by using the methods used to determine the best estimate liability, as specified in Part D of Prudential Standard LPS 340 Valuation of Policy Liabilities, but with the gross investment yield and gross discount rate set equal to the risk-free discount rate plus the illiquidity premium.
5.             An illiquidity premium must only be added to the risk-free discount rate for policies that are:
(a)          immediate life annuities;
(b)          immediate term certain annuities;
(c)          other types of annuities where there are no insurance risks other than longevity and servicing expenses;
(d)          fixed term/rate business; and
(e)          funeral bond business.
6.             If an illiquidity premium is added to the risk-free discount rate for a policy, the RFBEL must not be less than the minimum termination value or the contractual minimum surrender value for