Document ID: chunk:federal_register_of_legislation:F2023L00627:body:0:p6
Version: federal_register_of_legislation:F2023L00627
Segment Type: other
Provision Reference: 
Character Range: 14277–18053

of diversification benefits between the asset risk charge components as set out in LPS 114.

                                                              This must be calculated as the sum of the risk charge components less the Asset Risk Charge - aggregated risk charge component.

C
Combined Stress Scenario Adjustment  This Combined Stress Scenario tests whether the tax benefits recognised in determining the Insurance Risk Charge and the Asset Risk Charge can be offset against deferred tax liabilities. It also tests whether any future management actions allowed for in the calculation of the Insurance Risk Charge and the Asset Risk Charge would be achievable. This item also recognises any second order interactions between the asset and insurance risk stresses.

                                     This adjustment must be determined in accordance with LPS 110.

I
Insurance Risk Charge  The Insurance Risk Charge is the minimum amount of capital required to be held against insurance risks. The Insurance Risk Charge relates to the risk of adverse impacts due to movements in future mortality, morbidity, longevity, servicing expenses and lapses.

                       This must be determined in accordance with Prudential Standard LPS 115 Capital Adequacy: Insurance Risk Charge.

L
Life company fund  This means the type of life company fund. Possible types are:

                        * statutory fund;
                        * shareholder fund;
                        * benefit fund; and
                        * management fund.

O
Operational Risk Charge                                        The Operational Risk Charge is the minimum amount of capital required to be held against operational risks. The Operational Risk Charge relates to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events.

                                                               This must be determined in accordance with Prudential Standard LPS 118 Capital Adequacy: Operational Risk Charge (LPS 118).

Operational Risk Charge for investment-linked business (ORCI)  This is the Operational Risk Charge relating to the fund's investment-linked business.

                                                               The ORCI must be calculated in accordance with LPS 118.

Operational Risk Charge for other business (ORCO)              This is the Operational Risk Charge relating to the fund's businesses other than risk and investment-linked business.

                                                               The ORCO must be calculated in accordance with LPS 118.

Operational Risk Charge for risk business (ORCR)               This is the Operational Risk Charge relating to the fund's risk business.

                                                               The ORCR must be calculated in accordance with LPS 118.

P
Prescribed capital amount  The prescribed capital amount for the fund is calculated as the sum of:

                                * Asset Risk Charge;
                                * Insurance Risk Charge;
                                * Aggregate risk charge for variable annuities;
                                * Asset Concentration Risk Charge;
                                * Operational Risk Charge;
                                * Combined Stress Scenario Adjustment; and
                                * adjustments to prescribed capital amount as approved by APRA

                           less:

                                * aggregation benefit.

                           The prescribed capital amount for a life company is subject to a minimum of $10 million, and will be automatically applied where the calculated sum