Life Insurance (actuarial standards) determination No. 1 of 2006 varying actuarial standards 2.04, 3.04 and 7.02 (28/03/2006) (Cth)

Life Insurance (actuarial standards) determination No. 1 of 2006

Variations to Actuarial Standard 2.04: Solvency Standard, Actuarial Standard 3.04: Capital Adequacy Standard and Actuarial Standard 7.02: General Standard

Life Insurance Act 1995

The Life Insurance Actuarial Standards Board (LIASB), under subsection 101(1) of the Life Insurance Act 1995 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901, RESOLVES to VARY:

(a)        Actuarial Standard 2.04: Solvency Standard (made on 5 December 2005 for the purposes of subsection 65(1) of the Act) in the manner set out in the Schedule;

(b)Actuarial Standard 3.04: Capital Adequacy Standard (made on 5 December 2005 for the purposes of subsection 70(1) of the Act) in the manner set out in the Schedule;

(c)Actuarial Standard 7.02: General Standard (made on 5 December 2005 for general purposes) in the manner set out in the Schedule.

This instrument takes effect on the date of registration on the Federal Register of Legislative Instruments.

Dated:   28 March 2006

[signed]   [signed]

Timothy Jenkins   Michelle van den Berg

Chairperson   Secretary

LIASB   LIASB

I, Stephen Somogyi, a delegate of the Australian Prudential Regulation Authority (APRA), under subsections 65(3), 70(2) and 73B(3) of the Act, and subsection 33(3) of the Acts Interpretation Act 1901, AGREE to the variations contained in this instrument.

Dated:  28 March 2006

[signed]

………………………

Stephen Somogyi

Member

APRA

Note        the principal instruments, Actuarial Standard 2.04: Solvency Standard, Actuarial Standard 3.04: Capital Adequacy Standard and Actuarial Standard 7.02: General Standard, are set out in the Record of resolutions of the Life Insurance Actuarial Standards Board: actuarial standards dated 5 December 2005, which is registered on the Federal Register of Legislative Instruments.

Schedule

Variations to Actuarial Standard 2.04: Solvency Standard

Paragraph 10.5.2

omit

‘Attachment 2’ (each place occurring), and

substitute

‘Attachment 1 of the General Standard’.

Paragraph 10.5.7

substitute

‘10.5.7             In order for an insurance or reinsurance arrangement to qualify for treatment under subparagraph 10.5.1(f), (g), (h) or (i), or paragraph 10.5.2, it must, subject to a 6 month grace period from risk inception, comprise an executed and legally binding contract.  Draft or incomplete documentation can at best qualify under paragraph 10.5.1(m).’

After paragraph 11.6.1

insert

‘11.6.2             The prescribed reduction (but not increase) in yield for the Interest Bearing investment sector must not exceed 20% of the current Mid Swap Rate as determined for the purposes of paragraph 4.1.’

Variations to Actuarial Standard 3.04: Capital Adequacy Standard:

Subparagraph 10.5.1(l)

omit

‘Attachment 2’, and

substitute

‘Attachment 1 of the General Standard’.

Paragraph 10.5.2

omit

‘Attachment 2’ (each place occurring), and

substitute

‘Attachment 1 of the General Standard’.

Paragraph 10.5.7

substitute

‘10.5.7             In order for an insurance or reinsurance arrangement to qualify for treatment under subparagraph 10.5.1(f), (g), (h) or (i), or paragraph 10.5.2, it must, subject to a 6 month grace period from risk inception, comprise an executed and legally binding contract.  Draft or incomplete documentation can at best qualify under paragraph 10.5.1(m).’

Variation to Actuarial Standard 7.02: General Standard

Paragraph 5.2, definition of ‘Financial Services Entity’

omit the first bullet point and paragraph next to it, and

substitute

‘?     A life company (within the meaning of the Life Insurance Act 1995), general insurer (within the meaning of the Insurance Act 1973), health insurance institution (being a registered organization within the meaning of Part VI of the National Health Act 1953), ADI (within the meaning of the Banking Act 1959), foreign equivalent of any such company, or a Group containing one or more such companies;

• A mortgage lender, leasing company or Group containing one or more such companies;’