Document ID: chunk:federal_register_of_legislation:F2023L00671:body:0:p2
Version: federal_register_of_legislation:F2023L00671
Segment Type: other
Provision Reference: 
Character Range: 2802–6076

the method for calculating the Asset Concentration Risk Charge. This charge is one of the components of the Standard Method for calculating the prescribed capital amount for general insurers and Level 2 insurance groups.

Table of Contents
Authority
Application and commencement
Interpretation
Definitions
Asset Concentration Risk Charge principles
Asset Concentration Risk Charge calculation
Treatment of collateral and guarantees as risk mitigants
Reinsurance recoverables due from non-APRA authorised reinsurers
Adjustments and exclusions
Previous exercise of discretion
Attachment A – Asset exposure limits

Authority
     1. This Prudential Standard is made under section 32 of the Insurance Act 1973 (the Act).

Application and commencement
2.             This Prudential Standard applies to each:
       (a)          general insurer authorised under the Act (insurer); and

       (b)          Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001).

    Where a requirement is made in respect of a Level 2 insurance group, the requirement is imposed on the parent entity of the Level 2 insurance group.

3.             This Prudential Standard applies to insurers and Level 2 insurance groups (regulated institutions) from 1 July 2023.

Interpretation
4.             Terms that are defined in GPS 001 appear in bold the first time they are used in this Prudential Standard.
5.             For the purposes of this Prudential Standard:
       (a)          'Eligible Collateral Items' are cash, government securities or debt obligations (i.e. loans, deposits, placements, interest rate securities and other receivables) where the counterparty has a counterparty grade of 1, 2 or 3 as defined in Attachment C of GPS 001;

       (b)          'non-reinsurance exposures' are the on- and off-balance sheet exposures of an insurer or Level 2 insurance group other than exposures to a reinsurer;

       (c)          'reinsurance exposures' are the on- and off- balance sheet exposures of an insurer or Level 2 insurance group to reinsurance assets; and

       (d)          'residual maturity' is the remaining time until the expiration or the repayment of a financial instrument.

6.             Where this Prudential Standard provides for APRA to exercise a power or discretion, this power or discretion is to be exercised in writing.

Definitions
7.             Two or more counterparties will form a 'group of related counterparties' if they are linked by:
       (a)          cross guarantees;

       (b)          common ownership or management;

       (c)          the ability of a counterparty to exercise control (defined in accordance with the Australian Accounting Standards) over the other(s), whether direct or indirect;

       (d)          financial interdependency such that the financial soundness of any of them may affect the financial soundness of the other(s); or

       (e)          other connections or relationships that exist between counterparties, that in the regulated institution's assessment, constitute exposure to the counterparties as a single risk.

8.             In respect of any overseas entities within a Level 2 insurance group carrying on international business, identification of