Insurance (Prudential Standards) (Class 3A Solvency Requirement) Amendment (No. 2) Rules 2015

Summary

These Rules amend the Insurance (Prudential Standards) (Class 3A Solvency Requirement) Rules to change how Class 3A insurers calculate regulatory capital for investments in non-insurance financial entities, expand governance and group-structure disclosures in Schedule V, and add two new schedules to the statutory financial return.

• Capital charge table: Amends Schedule I, Table 2 capital charge factors for investments in affiliates, setting differentiated charges for unregulated ancillary-service entities (5.0%), unregulated non-financial operating entities (20.0%), unregulated financial operating entities (55.0%), and regulated insurance financial operating entities (20.0%).
• New capital requirement: Inserts new paragraph 12 in Schedule I requiring insurers to determine a regulatory capital requirement for regulated non-insurance financial operating entities, equal to the insurer's proportionate share of each entity's regulatory capital requirement under the solvency laws of its licensing jurisdiction.
• Expanded Schedule V disclosures: Requires detailed disclosure of board and management structure, service providers, jurisdictions of key decision-making, group financial position, top reinsurers, material subsequent events, group organizational chart, and details of segregated accounts (new paragraph (t)), including net loss reserves, premiums written, limited recourse language, inter-cell relationships and cell solvency status.
• New schedules: Inserts Schedule XVI (Schedule of Regulated Non-Insurance Financial Operating Entities) and Schedule XVII (Schedule of Minimum Margin of Solvency), each with detailed reporting instructions on entity details, participation interest, assets, and capital/solvency margin calculations.

The amendments come into operation on 1 January 2016 and apply to financial years commencing on or after that date, meaning affected Class 3A insurers must incorporate the new capital calculations and expanded Schedule V, XVI and XVII disclosures into their statutory financial returns for those financial years.

Key obligations

• Class 3A insurers must calculate a regulatory capital requirement for regulated non-insurance financial operating entities equal to their proportionate share of each such entity's regulatory capital requirement under the applicable jurisdiction's solvency laws, per new Schedule I paragraph 12.
• Insurers must apply the revised capital charge factors in Schedule I Table 2 for investments in affiliates based on entity classification (unregulated ancillary services, unregulated non-financial, unregulated financial, or regulated insurance financial operating entities).
• Insurers must disclose in Schedule V additional governance and group structure information, including board and management structure, service provider details, jurisdictions of key decision-making, group financial position, top reinsurer details, and a group organizational chart.
• Insurers with segregated account business must disclose in Schedule V (new paragraph (t)) detailed cell-level financial and risk information, including net loss reserves, premiums written, limited recourse terms, inter-cell relationships, and any cell deficits, insolvency or litigation.
• Insurers must complete new Schedule XVI reporting details of each regulated non-insurance financial operating entity in which they have control or significant influence, including participation interest, total assets, investment amount, and regulatory capital requirement share.
• Insurers must complete new Schedule XVII to calculate and report the minimum margin of solvency for affiliated entities over which they exercise control or significant influence.

Applies to

Class 3A insurers

Deadlines

• 1 January 2016: Rules come into operation and apply to financial years commencing on or after this date.

Related documents

• This document is made under Insurance Act 1978