Prudential standard

LPS 100 Solvency Standard

  • Life insurance
  • Current
    29 March 2023
Prudential framework pillars
Financial Resilience
Capital
Supporting

About this standard

This standard requires a life insurer to maintain minimum amounts of capital to meet fund solvency requirements under the Life Insurance Act 1995.

This standard forms part of the Financial Resilience Pillar. It applies to all life insurers, including friendly societies.

Objective and key requirements of this Prudential Standard

This Prudential Standard is made for the purposes of the Life Insurance Act 1995.
The Life Insurance Act 1995 makes provision for prudential standards in relation to the solvency of statutory funds.
This standard is a prudential standard in relation to solvency for the purposes of sections 3, 52, 62, 63 and 159 of the Life Insurance Act 1995. This Prudential Standard is satisfied in relation to a statutory fund if the capital base of the fund exceeds 90 per cent of the fund’s prescribed capital amount.
Preamble
Life Insurance (prudential standard) determination
No. 1 of 2023
Prudential Standard LPS 100 Solvency Standard
Life Insurance Act 1995
I, Clare Gibney, a delegate of :
under subsection 230A(5) of the Life Insurance Act (the Act) revoke Life Insurance (prudential standard) determination No. 8 of 2012, including Prudential Standard LPS 100 Solvency Standard made under that Determination; and
under subsection 230A(1) of the Act, determine Prudential Standard LPS 100 Solvency Standard, in the form set out in the Schedule, which applies to all life companies, including friendly societies.
This instrument commences on 29 March 2023.
Dated: 7 March 2023
Clare Gibney
Executive Director
Policy and Advice Division

Interpretation

In this instrument:
APRA means the Australian Prudential Regulation Authority.
friendly society has the meaning given in section 16C of the Act.
life company has the meaning given in the Schedule to the Act.

Schedule

Prudential Standard LPS 100 Solvency Standard comprises the document commencing on the following page.

Prudential Standard LPS 100

Solvency Standard

Authority

This Prudential Standard is made under paragraph 230A(1)(a) of the Life Insurance Act 1995 (the Act).

Application

This Prudential Standard applies to all life companies including friendly societies (together referred to as life companies) registered under the Act, except where expressly noted otherwise.
A must apply this Prudential Standard separately:
for a life company other than a : to each of its statutory funds; and
for a friendly society: to each of its approved benefit funds.
This Prudential Standard only applies to the business of an Eligible Foreign Life Insurance Company which is carried on through its Australian statutory funds but not otherwise.
This Prudential Standard applies to life companies from 1 January 2013.
This Prudential Standard applies only for the purposes of sections 3, 52, 62, 63 and 159 of the Act. Should these sections cease to contain references to prudential standards in relation to solvency, this Prudential Standard will cease to have effect.

Interpretation

Terms that are defined in Prudential Standard LPS 001 Definitions appear in bold the first time they are used in this Prudential Standard.
Unless otherwise indicated, the term statutory fund will be used to refer to a statutory fund of a life company other than a friendly society, or an approved benefit fund of a friendly society, as relevant.
This Prudential Standard is a prudential standard in relation to solvency for the purposes of sections 52, 62, 63 and 159 of the Act and a direction given to a life company under section 230B of the Act to comply with a requirement of this Prudential Standard is a direction in relation to solvency for the purposes of sections 62, 63 and 159 of the Act.
APRA
APRA means the Australian Prudential Regulation Authority.
[1]
  Refer to subsection 21(1) of the Act.
life company
life company has the meaning given in the Schedule to the Act.
friendly society
friendly society has the meaning given in section 16C of the Act.
[2]
Refer to section 16ZD of the Act.

Solvency requirement

A statutory fund satisfies the requirements of this Prudential Standard if the capital base of the fund exceeds 90 per cent of the fund’s prescribed capital amount.

Adjustments and exclusions

APRA may, by notice in writing to a life company, adjust or exclude a specific requirement in this Prudential Standard in relation to that life company.
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