Document ID: chunk:federal_register_of_legislation:F2024L00886:body:0:p12
Version: federal_register_of_legislation:F2024L00886
Segment Type: other
Provision Reference: 
Character Range: 29111–32038

a fund whose stressed reinsurance assets are reduced through the use of netting arrangements.
44.         Where a statutory fund has a reinsurance arrangement with a reinsurer that is:
(a)          an affiliated entity of the life company that APRA has approved for the purposes of item 1(g) of Attachment A; or
(b)          an overseas parent, associated, or subsidiary company which, with APRA's agreement, has been identified as an appropriate retrocessionaire for the purposes of paragraph 46;
    if APRA is of the view that there are prudential reasons for doing so, APRA may, in writing, waive the requirements of paragraph 43 and determine an alternative maximum percentage of the stressed reinsurance assets held in respect of that reinsurer (after applying netting according to paragraph 28) that can be treated as an exposure to eligible collateral, guarantors or issuer of letters of credit.

APRA-specified treatment of risk mitigants
45.         APRA may require a life company to apply a specified treatment to reinsurance assets supported by collateral, guarantees or letters of credit, rather than the treatment that would otherwise apply under paragraphs 31 to 42.

Specialist reinsurers
46.         In the case of a specialist reinsurer, the following asset concentration limits apply in respect of retrocessions by that specialist reinsurer to an overseas parent, associated, or subsidiary company which, with APRA's agreement, has been identified as an appropriate retrocessionaire for the purposes of this paragraph:
(a)          where the retrocessionaire has a current counterparty grade of 1, 2 or 3 – 50 per cent of VAF;
(b)          where the retrocessionaire does not have a current counterparty grade of 1, 2 or 3, but had such a grade at the time the retrocession arrangement was entered into;
(i)            within the first three months after the downgrade below Grade 3 – 50 per cent of VAF;
(ii)         within the next nine months – 33 per cent of VAF;
(iii)       within the second 12 months after the downgrade – 17 per cent of VAF; and
(iv)        thereafter, the retrocession arrangements do not qualify for the concessional treatment afforded to specialist reinsurers;
(c)          in all other circumstances, the retrocession arrangements do not qualify for the concessional treatment afforded to specialist reinsurers.
47.         Item 1(g) of Attachment A does not apply to a specialist reinsurer.

Adjustments and exclusions
48.         APRA may, by notice in writing to a life company, adjust or exclude a specific requirement in this Prudential Standard in relation to that life company.

Reliance on previous exercises of discretion
49.         A regulated institution must contact APRA if it seeks to place reliance, for the purposes of complying with this Prudential Standard, on a previous exemption or other exercise of discretion made by APRA under a previous version of this