Regulatory AlertsLPS 118 Capital Adequacy: Operational Risk Charge
The Australian Prudential Regulation Authority issued Prudential Standard LPS 118 to require all life companies to maintain adequate capital against operational risks. The standard mandates the use of a prescribed calculation method to determine the Operational Risk Charge, which covers losses from failed internal processes, people, systems, or external events. This charge serves as a minimum capital component for statutory and management funds, with specific formulas applied to risk, investment-linked, and other business lines.
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