Regulatory AlertsLPS 370 Cost of Investment Performance Guarantees
The Australian Prudential Regulation Authority issued Prudential Standard LPS 370 to regulate the calculation and demonstration of costs for investment performance guarantees provided by life insurers. The standard requires life companies to calculate these costs as the increase in the fair value of the financial instrument element attributable to the guarantees, using relevant accounting standards. Furthermore, it mandates that the resulting investment performance guarantee factor must not exceed 5 percent of the total policy liabilities for each applicable statutory fund at all times.
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