Document ID: chunk:federal_register_of_legislation:F2023L00686:body:0:p3
Version: federal_register_of_legislation:F2023L00686
Segment Type: other
Provision Reference: 
Character Range: 5522–8522

of business.

Premiums Liability Risk
10.         The risk charge for Premiums Liability Risk relates to the risk that the value of the net premiums liabilities will be greater than the value determined in accordance with GPS 340. It also relates to the risk that 'material net written premium', as defined in paragraph 17, will be insufficient to fund the liabilities arising from that business.
11.         For the purposes of the Standard Method, the risk charge for each class of business is calculated by multiplying the sum of:
       (a)          net premiums liabilities as determined in accordance with GPS 340; and

       (b)          material net written premiums

    by the relevant Premiums Liability Risk Capital Factor in Attachment A. The total risk charge for Premiums Liability Risk is the sum of the risk charges for Premiums Liability Risk for each class of business.

Classes of business
12.         For the purposes of the Outstanding Claims Risk Capital Factor and Premiums Liability Risk Capital Factor, all but the 'other' direct class of business[1] and 'other' reinsurance class of business have been classified into different categories in Attachment A (Table 1 and Table 2 respectively). The 'other' class of business must be allocated to a category by the Actuary, in accordance with paragraphs 13 and 14.
13.         For the purpose of calculating the Insurance Risk Charge in respect of any 'other' business (whether it is direct business or reinsurance), the Actuary is required to determine the most appropriate category (i.e. category A, B or C) in Table 1 and Table 2 of Attachment A. The choice must be based on the underlying risk characteristics of the business being written. The regulated institution must then apply the corresponding Outstanding Claims Risk Capital Factor and Premiums Liability Risk Capital Factor listed in Attachment A in determining the Insurance Risk Charge.
14.         If the 'other' class of business includes multiple risks with differing risk profiles, the Actuary may subdivide the net outstanding claims liabilities, net premiums liabilities and material net written premiums into more than one category.
15.         The reasons for selecting the specific risk category or categories to which the 'other' class of business is assigned must be documented in the Actuarial Valuation Report.

Business covering multiple classes
16.         Where a regulated institution underwrites an inwards reinsurance contract which spans multiple classes, the contract must be allocated by using an appropriate method (provided the same method is used for all contracts and all subsequent periods). Appropriate methods include:
       (a)          allocating the contract on a pro rata basis to each of the relevant categories; or

       (b)          allocating the contract to the category which represents the greatest exposure; or

       (c)          allocating the contract to the category representing the greatest premium income.