Page 90 - Suncorp_Review

88

Notes to the consolidated fnancial statements (continued)

for the year ended 30 June 2011

8. Life – Specifc disclosures (continued)

8.8 Life – Capital and solvency requirements

Life insurance businesses are required to hold prudential reserves, over and above their life insurance contract and investment contract liabilities, as a buffer against adverse experience and poor investment returns. This involves the monitoring of two aspects of each life statutory fund – solvency and capital adequacy.

The purpose of the solvency requirement is to ensure, as far as practicable, that at any time the Suncorp Group will be able to meet all existing liabilities as they become due. The capital adequacy requirement is a separate requirement (usually higher) that must be satisfed for the life company to be allowed to make distributions to its shareholders and to operate without regulatory intervention.

Capital adequacy requirements for Australian life insurers are specifed in the Life Act and LPS 3.04 Capital Adequacy Standard with the Suncorp Group’s Life companies holding a target surplus of capital in excess of this prescribed minimum. In the absence of New Zealand regulatory requirements relating to capital adequacy, the Suncorp Group determines the minimum capital requirements for its New Zealand life company according to the business and operational needs. The methodology and bases for determining Australian solvency requirements is in accordance with LPS 2.04 Solvency Standard , as required under the Life Act . For New Zealand, this amount has been calculated as at 30 June 2011 in accordance with Professional Standard 5.01 (PS5.01) issued by the New Zealand Society of Actuaries.

The Appointed Actuaries have confrmed that the available assets of each life statutory fund have exceeded the capital adequacy and the solvency reserve required at all times during the year. For detailed solvency information on a statutory fund basis, users of this fnancial report should refer to the fnancial statements prepared by the Life companies.

LIFE

2011 2010 $m $m

Solvency requirement 7,445 7,332 Assets available for solvency reserve 631 940 Solvency reserve 6.3% 6.1% Coverage of solvency reserve (times) 1.5 2.3

Sensitivity tests are performed on a quarterly basis to ascertain the ability of the statutory funds to withstand various adverse asset shock scenarios.