APRA rectifies error that loosened rules for overseas insurer parent companies

APRA rectifies error that loosened rules for overseas insurer parent companies

APRA rectifies error that loosened rules for overseas insurer parent companies APRA has identified and rectified an error in Prudential Standard GPS 117 Capital Adequacy: Asset Concentration Risk Charge which resulted in lower limit exposures to counterparties that are APRA-regulated but owned by an overseas parent.

The current definition is drafted such that a counterparty is not part of an APRA-regulated group if the ultimate parent is not APRA-regulated.

The application of this definition results in lower limits for exposures to counterparties that are APRA- regulated, but owned by an overseas parent. APRA said this was not its intention.

APRA has addressed this error by specifically including references to APRA-regulated counterparties in paragraph 16 of a revised version of GPS 117.

Under the revised standard, exposures to counterparties that are specifically APRA- regulated (but foreign owned) will be subject to the same asset concentration limits as exposures to counterparties where the ultimate parent is APRA- regulated.

After reviewing GPS 117, APRA identified three “minor” matters: GPS 117 now includes a life insurance non-operating holding company as APRA-regulated; and APRA has aligned the definition of ‘eligible collateral terms’ with the definition that appears in Prudential Standard GPS 117 Capital Adequacy: Asset Concentration Risk Charge.

The revised steps come into force on 1 July.