General Information & Client Service
  • Americas: +1.212.553.1653
  • Asia: +852.3551.3077
  • China: +86.10.6319.6580
  • EMEA: +44.20.7772.5454
  • Japan: +81.3.5408.4100
Media Relations
  • New York: +1.212.553.0376
  • London: +44.20.7772.5456
  • Hong Kong: +852.3758.1350
  • Tokyo: +813.5408.4110
  • Sydney: +61.2.9270.8141
  • Mexico City: +001.888.779.5833
  • Buenos Aires: +0800.666.3506
  • São Paulo: +0800.891.2518
December 15, 2017

APRA published a letter about the review of Prudential Standard LPS 117 Capital Adequacy: Asset Concentration Risk Charge or ACRC (LPS 117), to ensure it remains fit for purpose and in line with the objectives in the APRA mandate. APRA intends to commence this review in the second half of 2018. The review will focus on the elements of LPS 117 dealing with asset concentration risk arising from reinsurance arrangements. It may also be necessary to review related aspects of Prudential Standard LPS 114 Capital Adequacy: Asset Risk Charge.

APRA has received a number of representations on the increasing use (by APRA-registered life insurers) of reinsurance arrangements entered into with offshore life reinsurers that are not registered under the Life Insurance Act 1995 (non-registered reinsurers). These representations have focused on two main issues: that non-registered reinsurers are not subject to the same regulatory requirements as APRA-registered life insurers; that there may be potential for systemic risks being introduced to the Australian life insurance market through increased involvement of non-registered reinsurers.

In some cases, APRA has exercised its discretion to adjust the requirements of LPS 117, to allow collateral trust arrangements to be used to mitigate exposures to non-registered reinsurers for the purpose of calculating the ACRC. These adjustments have been made where APRA was satisfied that the specific collateral trust arrangements provided an effective risk mitigant for ACRC purposes. Until the outcomes of the review of LPS 117 are clearly known, APRA is not inclined to grant any further discretionary approvals to allow entities to mitigate exposures to non-registered reinsurers for the purpose of calculating the ACRC. As part of the review, APRA will assess the future use of collateral trust arrangements, including whether they should be permitted for the purposes of LPS 117.

 

Related Link: APRA Letter (PDF)

Keywords: Asia Pacific, Australia, Insurance, Reinsurance, LPS 117, Capital Adequacy, ACRC, Systemic Risk, APRA

Related Insights
News

HKMA Announces Intention to Consult on Updated BCBS Disclosure Rules

HKMA announced that it will consult the industry in due course on the relevant implementation proposal to give effect to the disclosure requirements of the December 2018 package by BCBS.

December 17, 2018 WebPage Regulatory News
News

US Agencies Propose Derivative Counterparty Credit Exposure Framework

US Agencies (OCC, FED, and FDIC) proposed to implement a new approach for calculating the exposure amount of derivative contracts under the regulatory capital rule.

December 17, 2018 WebPage Regulatory News
News

HKMA Issues and Revises Reporting Forms Under the IRRBB Framework

HKMA issued a revised version of the Supervisory Policy Manual (SPM) IR-1, with an updated title “Interest Rate Risk in the Banking Book” (IRRBB).

December 14, 2018 WebPage Regulatory News
News

EBA Single Rulebook Q&A: Second Update for December 2018

EBA published answers to six questions under the Single Rulebook question and answer (Q&A) updates for this week.

December 14, 2018 WebPage Regulatory News
News

OSFI Proposes Changes to Guideline on Large Exposure Limits

OSFI proposed revisions to the Guideline B-2 on Large Exposure Limits, for implementation in the first quarter of 2020.

December 13, 2018 WebPage Regulatory News
News

BCBS Consults on Disclosure Rules for Leverage Ratio Window-Dressing

BCBS published a consultative document on revisions to the leverage ratio disclosure requirements to address the leverage ratio window-dressing behavior.

December 13, 2018 WebPage Regulatory News
News

PRA Updates the Policy on Approach to Systemic Risk Buffer

PRA published the final Statement of Policy on the PRA approach to the implementation of the systemic risk buffer (SRB), as proposed in the consultation paper CP29/18.

December 13, 2018 WebPage Regulatory News
News

EP Report Examines Financial Supervision and Regulation in US

European Parliament published a report that provides a concise overview of the Dodd-Frank Act, the challenges of its implementation, and efforts to roll back the Act, in large part due to what are viewed to be vague and impractical provisions.

December 12, 2018 WebPage Regulatory News
News

FED Proposes to Revise Several Reporting Forms Including FR Y-9C

FED proposed to extend for three years, with revision, the FR Y-9, FR Y-7N, FR Y-11, and FR 2314 family of reports, in addition to the forms FR 2886b, FR Y-8, FR 2248, FR 2320, FR 2644, and FR 2886b.

December 12, 2018 WebPage Regulatory News
News

EBA Finalizes Guidelines on the STS Criteria in Securitization

EBA published the final guidelines that provide a harmonized interpretation of the criteria for a securitization to be eligible as simple, transparent, and standardized (STS) on a cross-sectoral basis throughout EU.

December 12, 2018 WebPage Regulatory News
RESULTS 1 - 10 OF 2340