Financial Sector (Collection of Data) determination No. 17 of 2005 (Cth)
Financial Sector (Collection of Data) determination No. 17 of 2005
Reporting Standard GRS 300.0 (2005)
Financial Sector (Collection of Data) Act 2001
I, Charles Watts Littrell, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (‘the Act’) MAKE the reporting standard set out in the Schedule, which applies to financial sector entities of the kind specified in paragraph 2 of the reporting standard.
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments.
Dated 21 June 2005
[signed]
……………………............
Charles Littrell
Executive General Manager
Policy, Research and Statistics Division
APRA
Interpretation
In this Notice
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard GRS 300.0 (2005)
Statement of Financial Position
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, information on their financial position.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
the versions of Form GRF 300.0 Statement of Financial Position (Form GRF 300.0) designated for a ‘Licensed Insurer’, ‘Licensed Insurer - Inside Australia’, ‘Branch Insurer - Inside Australia’, ‘Branch Total Operations’ and ‘Consolidated Insurance Group’ and the associated instructions (which are attached and all form part of this reporting standard); and
·Prudential Standard GPS 110 Capital Adequacy for General Insurers and Guidance Notes GGN 110.1, GGN 110.2, GGN 110.3, GGN 110.4 and GGN 110.5.
Purpose
Data collected in each version of Form GRF 300.0 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with Prudential Standard GPS 110.0 Capital Adequacy for General Insurers.
Application and commencement
This reporting standard applies to all insurers and shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments.
Information required
A locally-incorporated insurer must:
(a) if it only writes insurance business inside Australia, provide APRA with the information required by the version of Form GRF 300.0 designated for a ‘Licensed Insurer’ for each reporting period; or
(b) if it writes insurance business both inside and outside Australia, provide APRA with the information required by:
the version of Form GRF 300.0 designated for a ‘Licensed Insurer’; and
the version of Form GRF 300.0 designated ‘Licensed Insurer - Inside Australia’
for each reporting period.
A foreign insurer must provide APRA with the information required by the versions of Form GRF 300.0 designated for a ‘Branch Insurer - Inside Australia’ and ‘Branch Total Operations’ for each reporting period.
An insurer that is a highest parent entity in relation to a consolidated insurance group must also provide APRA with the information required by the version of Form GRF 300.0 designated for a ‘Consolidated Insurance Group’ for each reporting period.
Forms and method of submission
The information required by this reporting standard must be given to APRA either:
(a)in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application; or
(b)manually completed on paper, which must be faxed or mailed to APRA’s head office.
Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 8, an insurer must provide the information required by this reporting standard:
(a) in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and
(b) in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.
Note: The annual information required by paragraphs 3 and 4 read with subparagraph 7(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards. (The annual information required from a highest parent entity under paragraph 5 and subparagraph 7(b) is not required to be audited. APRA proposes to determine an exemption, under section 7 of the Insurance Act, in relation to the obligations under Part IV Division 4 of the Act in respect of the auditing of this information.)
APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:
(a) more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or
(b) less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 7(a) or (b)).
The information required by paragraph 3 of this reporting standard from a locally-incorporated insurer, and paragraph 4 from a foreign insurer, must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 7(a) – 20 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 7(b) – 4 months after the end of the reporting period to which the information relates.
Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate (relating to the information required by paragraphs 3 and 4 read with subparagraph 7(b)) must be provided to APRA by the time specified in subparagraph 9(b) of this reporting standard (unless an extension is granted under paragraph 11).
The information required by paragraph 5 of this reporting standard from an insurer that is a highest parent entity must be provided to APRA by the following times:
(a) in the case of the quarterly information required by subparagraph 7(a) – 30 business days after the end of the reporting period to which the information relates; and
(b) in the case of the annual information required by subparagraph 7(b) – 4 months after the end of the reporting period to which the information relates.
APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
The information provided by an insurer under this reporting standard (other than the information required from a highest parent entity under paragraph 5) must be the product of processes and controls that have been reviewed and tested by the approved auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the approved auditor to form an opinion on the accuracy and reliability of the data.
The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
If an insurer submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the insurer to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the insurer who have authority from the insurer to transmit the data to APRA.
If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:
(a) the Principal Executive Officer of the insurer; or
(b) the Chief Financial Officer of the insurer (whatever his or her official title may be).
Minor alterations to forms and instructions
APRA may make minor variations to:
(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b) the instructions to a form, to clarify their application to the form
without changing any substantive requirement in the form or instructions.
If APRA makes such a variation it must notify insurers in writing.
Transitional
If a reporting period of an insurer ended on 30 June 2005, or ends after that date, the insurer must report under this reporting standard in respect of that reporting period.
Interpretation
In this reporting standard:
Accounting Standard AASB 1024 means the accounting standard so designated made by the Australian Accounting Standards Board, being the accounting standard that applied in respect of reporting periods (within the meaning of the accounting standard) commencing immediately before 1 January 2005;
approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
consolidated insurance group means a group comprising:
(a) an insurer that is a highest parent entity; and
(b) each subsidiary under the control (within the meaning of Accounting Standard AASB 1024) of that insurer, whether the subsidiary is incorporated in Australia or not;
foreign insurer means a foreign general insurer within the meaning of the Insurance Act;
Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.
highest parent entity means an insurer that satisfies all of the following conditions:
(a) it is a locally-incorporated insurer;
(b) it has at least one subsidiary under its control (within the meaning of Accounting Standard AASB 1024); and
(c) it is not itself a subsidiary of a locally-incorporated insurer;
Insurance Act means the Insurance Act 1973;
insurer means a general insurer within the meaning of the Insurance Act;
Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.
locally-incorporated insurer means a general insurer incorporated in Australia;
Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;
reporting period means a period mentioned in subparagraph 7(a) or (b) or, if applicable, paragraph 8.
A reference to a prudential standard or guidance note means the prudential standard or guidance note, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard or guidance note has been revoked and replaced, the reference shall be taken to be to the prudential standard or guidance note that has replaced it.
Reporting Form GRF 300.0
Statement of Financial Position
General Overview of the Reporting Framework for Collection of the Statements of Financial Position
Introduction
GRF 300.0 Statement of Financial Position provides APRA with the necessary information on assets, liabilities and capital to undertake an assessment of an insurer’s financial position and performance and facilitate in calculating assessing and compliance with the minimum capital requirements.
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing. The forms relating to the consolidated insurance group reporting unit is not subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Audit Guidance Statement issued by the Auditing and Assurance Board of the Australian Accounting Research Foundation.
Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973. This means that:
the completed form for the financial year must be audited by the approved auditor of the insurer (see paragraph 49J(1)(a) of the Act);
the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));
the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));
the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entities
A Statement of Financial Position is required for three reporting units, for each licensed insurance entity (direct insurer or reinsurer as applicable). The instruction guide for the GRF 300.0 Statement of Financial Position is to be used to complete the form where appropriate for each of the 3 reporting units.
The scope of the reporting units are outlined below:
Statement of Financial Position - Inside Australia
This has the following scope:
Is an unconsolidated report of the Australian licensed insurer’s/reinsurer’s operations that are booked “Inside Australia”. Do not consolidate Australian and offshore controlled entities (i.e. subsidiaries) for the purposes of completing the “Inside Australia” section of the form. These entities will be reported as part of the Statement of Financial Position for the Consolidated Insurance Group reporting entity (refer below).; and
If all the business of the insurer is inside Australia i.e. the insurer has no assets, liabilities or equity items outside of Australia, then the insurer does not need to complete GRF 300.0 Statement of Financial Position – Inside Australia, but must complete the GRF 300.0 Statement of Financial Position – Licensed Insurer.
Inside Australia
GPS 120 Assets in Australia for General Insurers applies to all general insurers authorised under the Insurance Act 1973 (the Act) and requires all insurers to maintain assets in Australia of a value that equals or exceeds the total amount of the insurer’s liabilities in Australia. GPS 120 Assets in Australia for General Insurers made under section 32 of the Act sets out when assets will be counted as “assets in Australia” for all general insurers, for the purpose of section 28 of the Act.[1]
[1] Section 28 of the Act provides that a general insurer commits an offence if it does not hold assets in Australia (excluding goodwill and any other amount excluded by the prudential standards for the purpose of section 28) of a value that is equal to or greater than the total amount of its liabilities in Australia, and APRA has not authorised the insurer to hold assets of a lesser value or determined under subsection 7(1) that section 28 does not apply to the insurer.
These requirements to maintain sufficient assets inside Australia are designed to ensure that the total value of assets held within the jurisdictional reach of APRA and the Australian courts is sufficient to meet an insurer’s Australian liabilities. They assist in the enforcement of section 116 of the Act, which provides that in the winding up of an insurer, the assets in Australia shall not be applied in the discharge of its liabilities other than its liabilities in Australia unless all the Australian liabilities have first been discharged.
Requirement to maintain assets Inside Australia
The Act sets out a number of assets and liabilities, which are to be treated as assets or liabilities in Australia.[2] However, the Act does not provide an exhaustive definition. GPS 120 Assets in Australia for General Insurers specifies additional requirements for that purpose.
[2] Refer section 116A of the Act
Generally speaking, assets are situated “in Australia” when actually located in Australia. In regard to investments, the place of registration generally determines where the investments are located. For example if the share register (for shares) is maintained in Australia then that investment is regarded as an Australian asset. Amounts due are located where the debtor is located. Accordingly, premiums due from non-residents are “outside Australia” assets.
Assets not included as in Australia
The prudential standards may specify assets that are not considered as assets in Australia.[3] For this purpose, the following assets are excluded (in addition to goodwill[4]):
[3] Under section 28 of the Act.
[4] Goodwill is excluded by section 28 of the Act.
(a) other intangible assets;
(b) future income tax benefits (net of provisions for deferred income tax liabilities); and
(c) assets under a fixed or floating charge, mortgage or other security (to the extent of the indebtedness secured by such assets).
However for the purposes of completing GRF 300.0 Statement of Financial Position – Inside Australia and GRF 300.0 Statement of Financial Position – Licensed Insurer, the above items are to be included in the appropriate asset classifications. However for the purpose of determining the insurer’s compliance with section 28 of the Act, these assets are deducted from the value of net assets in Australia in GRF 110.0 Minimum Capital Requirement.
GPS 120 Assets in Australia for General Insurers provides that the following requirements must be considered when determining whether the following assets are to be considered inside Australia. Insurers are required to adhere to these requirements when completing the asset sections (i.e. current asset and non current asset sections) of GRF 300.0 Statement of Financial Position – Inside Australia.
Chattels and real property
In relation to a foreign insurer, an asset comprising a chattel or real property, or an asset that is an equitable interest in a chattel or real property, will not be regarded as an asset in Australia unless:
(a) either:
(i)the legal title is held by the foreign insurer’s agent in Australia or by a custodian appointed by the foreign insurer’s agent in Australia and that custodian is incorporated in Australia (to ensure that the foreign insurer’s agent has control over the asset); and
(ii)the physical asset is located in Australia; or
(b) the asset is an equitable interest, or an interest in a managed investment scheme, the interest is held by a person mentioned in sub-paragraph (a)(i), the interest is covered by section (iv) ‘Units in unit trusts’ below, and is not excluded from being an asset in Australia under those provisions.
Loans and amounts due (including debentures)
In relation to a foreign insurer, an asset which is a loan to, or amount due from, another person (including an investment, such as a debenture, held with Austraclear or RITS), or an asset which is an equitable interest in such a loan or amount due, will not be regarded as an asset in Australia, unless:
(a) either:
(i)the creditor, or owner of the asset, is the insurer or the insurer’s custodian and that custodian is incorporated in Australia; and
(ii)the outstanding amount is payable in Australia and the debtor is physically located in Australia;
(b) or:
(i)the asset is held on a securities system in Australia (e.g. Austraclear or RITS) and can be readily sold in Australia; and
(ii)the account in which the asset is held in the securities system is controlled by the insurer or the insurer’s custodian and that custodian is incorporated in Australia; or
(c) the asset is an equitable interest, or an interest in a managed investment scheme, the interest is held by a person mentioned in sub-paragraph (a)(i), the interest is covered by section (iv) ‘Units in unit trusts’ below, and is not excluded from being an asset in Australia under those provisions.
Shares
In relation to a locally-incorporated insurer, an asset held by the insurer which is a share, or an equitable interest in a share, will not be regarded as an asset in Australia unless:
(a) it is registered within Australia (e.g. on CHESS), and is under the direct control of the insurer or its custodian and that custodian is incorporated in Australia; or
(b) the asset is an equitable interest, or an interest in a managed investment scheme, the interest is held by a person mentioned in sub-paragraph (a) and the share is registered in Australia, the interest is covered by section (iv) ‘Units in unit trusts’ below, and is not excluded from being an asset in Australia under those provisions.
Units in unit trusts
A unit in a unit trust will not be regarded as an asset in Australia except where the trustee and, if applicable, the responsibility entity is (if a natural person) resident in Australia or (if incorporated) is incorporated in Australia.
A unit in a unit trust will not be regarded as an asset in Australia if the underlying assets would not be assets in Australia if held by the insurer itself. However, APRA may in its discretion determine that this provision does not apply to the interest of a particular insurer in a diversified trust which contains some assets that are not regarded as assets in Australia within the meaning of the Act or this Standard.
A unit in a unit trust will not be regarded as an asset in Australia if, under the trust deed, the trustee has the right to suspend or delay the redemption of the unit pending sale of any of the trust’s property outside Australia.
Assets held on trust other than through a unit trust, or held through a managed investment scheme
An asset held on trust, other than through a unit trust, or an interest in a managed investment scheme, will not be regarded as an asset in Australia except where the trustee and, if applicable, the responsible entity is (if a natural person) resident in Australia or (if incorporated) is incorporated in Australia.
An equitable or similar interest of an insurer in an asset (the “underlying asset”) held on trust, other than through a unit trust,[5] or under a managed investment scheme, will not be regarded as an asset in Australia if the underlying asset would not be an asset in Australia if held by the insurer itself. However, APRA may in its discretion determine that this provision does not apply to the interest of a particular insurer in a diversified trust which contains some assets that are not regarded as assets in Australia within the meaning of the Act or this Standard.
[5] Unit trusts are dealt with in paragraphs 12-15.
Reinsurance
The Act permits certain reinsurance assets to be regarded as assets in Australia. Before these assets are accepted as assets in Australia, an insurer must be able to demonstrate to APRA that the assets meet the criteria specified in section 116A of the Act, by providing appropriate evidence to APRA.
Outside Australia reinsurance debts owing (for claims paid and claims recognised in the outstanding claims provision) to authorised general insurers are not to be disclosed as “Inside Australia” assets. However GPS 120 Assets in Australia for General Insurers provides that an insurer can obtain approval from APRA for reinsurance recoveries from reinsurers overseas to be counted as assets in Australia in terms of section 116A(1). For the purposes of section 28 (General insurer must hold sufficient assets), an amount is taken to be an asset in Australia of an insurer if:
(a) the insurer expects to recover the amount under a contract of reinsurance entered into with a person who is outside Australia; and
(b) the amount relates to claims in respect of liabilities in Australia of the insurer, whether or not the claims have been paid by the insurer; and
(c) under the terms of the contract, payments by way of reinsurance are to be made in Australia.
Exemptions
Authorised insurers (licensed entities), which do not have any overseas branches or do not have any material dealings/balances “outside of Australia”, are not required to complete the forms for this reporting unit.
(Note: for the Inside Australia reporting unit, the Net Assets does not necessarily have to balance with the total for Shareholders Equity. This situation may arise where not all assets, liabilities and reserves are Inside Australia).
Statement of Financial Position - Licensed Insurer
This form relates to assets, liabilities and equity items of the Australian licensed insurance entity, and has the following scope:
Includes transactions of the authorised Australian Insurance entity regardless of the residency status of the customer or the asset or liability;
Includes any offshore operations or business of the authorised Insurance entity (e.g. branches but not controlled entities), and will reflect investments in associated entities and joint ventures; and
Does not include controlled entities of the Australian authorised insurance entity, unless prior approval is obtained from APRA.
Statement of Financial Position - Consolidated Insurance Group
For the purposes of APRA prudential reporting, the consolidated insurance group is interpreted as the accounts incorporating the highest parent entity in a group structure, that is an Australian authorised general insurance entity (for the purposes of the Insurance Act 1973), and includes all subsidiaries (registered both in Australia and overseas) of that parent entity.
For the purposes of this form, the highest parent entity in the corporate group does not include a company (e.g. non-operating holding company) that is not an authorised general insurance entity.
Definition of subsidiaries should be consistent with the requirements of Australian accounting standards AASB 1024 ‘Consolidated Accounts’.
Exemptions
Australian authorised insurers which do not have any subsidiaries are not required to complete the forms for this reporting unit.
Australian authorised insurers which have subsidiaries, but the financial position of the consolidated insurance group is not materially different from that of the licensed insurance entity, are not required to complete the forms for this reporting unit (i.e. the subsidiaries do not have any material dealings/balances).
Instruction Guide
Introduction
This Instruction Guide is designed to assist in the completion of GRF 300.0 Statement of Financial Position, for the 3 reporting entities (i.e. Inside Australia, Licensed Entity & Consolidated Insurance Group) where appropriate. The instruction guide provides:
General directions and notes for preparation and lodgement; and
Explanatory notes for specific items.
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’. In addition, the ‘Glossary of Terms’ also contains a list of definitions of common data reporting items.
Unit of Measurement
GRF 300.0 Statement of Financial Position is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 1012 ‘Foreign Currency Translation’.
The general requirements of AASB 1012 for translation are:
Foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date; and
Other items outstanding at the reporting date must not be retranslated subsequent to initial recognition of the transaction.
Monetary items are defined to mean money held and assets and liabilities that are to be received or paid in fixed or determinable amounts of money (e.g. claims payments, reinsurance recoveries).
Monetary items arising under foreign currency derivative contracts at the reporting date must be translated as follows:
Where the exchange rate is fixed in the contract, at that fixed exchange rate; and
Where the exchange rate varies, at the spot rate at the reporting date.
The general requirements of AASB 1012 for accounting treatment of exchange differences arising on translation are:
Exchange differences must be recognised as either revenues or expenses in the calculation of net profit or loss on GRF 310.3 Investment and Other Operating Income and Expense, in the reporting period in which the exchange rates change.
Exchange differences arise in respect of foreign currency monetary items which is directly attributable to the acquisition, construction or production of an asset that takes a long period of time to get ready for its intended use or sale, must be capitalised (net of any effects of a hedge) as part of the cost of that asset.
Translation of financial reports of foreign operations.
(A foreign operation is defined in AASB 1012 as meaning an entity for which financial reports are prepared in a foreign currency, and includes branches, associates and subsidiaries).
Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a self-sustaining foreign operation, must be recognised as revenues or expenses in the calculation of net profit or loss on GRF 310.3 Investment and Other Operating Income and Expense, in the reporting period in which the exchange rates change.
However on incorporation of that foreign operation into the entity’s financial report (i.e. the preparation of consolidated group accounts), the translation of the financial reports of a self sustaining foreign operation as at the reporting date must be done using the current rate method (see below). Any exchange differences, together with any income tax expense (income tax revenue) must be taken directly to the foreign currency translation reserve within equity.
A self-sustaining foreign operation is defined in AASB 1012 as meaning a foreign operation that is financially and operational independent of the entity and whose operations do not normally expose the entity to foreign exchange gains and or losses.
Translation of financial reports of an integrated foreign operation must be translated as at the reporting date using the temporal method (see below) and any exchange differences must be recognised as revenues or expenses in the calculation of net profit and loss.
An integrated foreign operation is defined in AASB 1012 as a foreign operation that is financially and operationally interdependent, either directly or indirectly with the entity, and whose day to day operations normally expose the entity to foreign exchange gains or losses.
Current Rate Method of Translation
(a) Assets and liabilities are translated at the spot rate at the reporting date;
(b) Equity at the date of investment, including in the case of a corporation, share capital at acquisition and pre-acquisition reserves, is translated at the exchange rate current at that date;
(c) post-acquisition movements in equity, other than retained profits (surplus) or accumulated losses (deficiency), are translated at the exchange rates current at the dates of those movements, except that where a movement represents a transfer between items within equity or a return of equity, the movement is translated at the exchange rate current at the date that the amount transferred or returned was first included in equity;
(d) distributions from retained profits (that is, dividends paid or proposed, or their equivalent) are translated at the exchange rates current at the dates when the distributions were first recognised; and
(e) revenue and expense items are translated at the exchange rates current at the applicable transaction dates except that revenues and expenses that have been restated in accordance with paragraph 7.11 of AASB 1012 are translated at the spot rate at the reporting date[6]
[6] Extracted from ICAA Members' Handbook December 2001 issue, AASB 1012.
Temporal Method of Translation
Means a method of translating the financial report of a foreign operation whereby:
(a)
monetary items are translated at the spot rate at the reporting date; and
non-monetary items are translated at exchange rates current at the transaction dates or, where a non-monetary item has been revalued or written-down or the write-down has been reversed, at the exchange rate current at the date of revaluation, write-down or reversal;
(b) equity at the date of investment, including in the case of a corporation, share capital at acquisition and pre-acquisition reserves, is translated at the exchange rate current at that date;
(c) post-acquisition movements in equity, other than retained profits (surplus) or accumulated losses (deficiency), are translated at the exchange rates current at the dates of those movements, except that where a movement represents a transfer between items within equity or a return of equity, the movement is translated at the exchange rate current at the date that the amount transferred or returned was first included in equity;
(d) distributions from retained profits (that is, dividends paid or proposed, or their equivalent) are translated at the exchange rates current at the dates when the distributions were first recognised; and
(e) revenue and expense items are translated at the exchange rates current at the applicable transaction dates, except that:
revenues and expenses (including depreciation) that relate to non-monetary items are translated at the rates used to translate those non-monetary items; and
revenues and expenses that have been restated in accordance with paragraph 7.11 of AASB 1012 are translated at the spot rate at the reporting date.[7]
Spot rate means the exchange rate for immediate delivery of currencies to be exchanged.
[7] Extracted from ICAA Members' Handbook December 2001 issue, AASB 1012.
Reporting period
Insurers are required to report the information in the reporting form on a quarterly and annual basis.
The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
The annual information is to be completed in respect of the financial year of the insurer.
The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer. See the Reporting Requirements table for details.
Reporting lag
This form must be lodged for each of the reporting units, within the number of business days after the end of the quarter as set out in the Reporting Requirements table.
Basis of preparation
With the exception of the definition, recognition and measurement requirements of the items listed below, general insurers are requested to follow the Australian accounting standards regarding the definition, recognition and measurement of assets, liabilities and equity items in completing this form, notably AASB 1023 ‘Financial Reporting of General Insurance Activities’.
Outstanding Claims Provision;
Reinsurance Recoveries;
Premium Liabilities;
Expected Reinsurance Recoveries;
Deferred Reinsurance Expense; and
Deferred Acquisition Costs.
The interpretation and required measurement basis for these items listed are specified in these instructions and also outlined in the introduction to the reporting package.
Recognition of items for regulatory reporting purposes not recognised under AASB 1023:
Expected reinsurance recoveries (associate with Premium Liabilities).
For regulatory reporting this is a new asset item and a new component of reinsurance recoveries disclosed in the statement of financial performance. This item is measured on a prospective basis similar to Premium Liabilities.
The non-recognition of items for regulatory reporting purposes that are recognised under AASB 1023:
Unearned premiums provision.
This item is not recognised for prudential reporting as premium revenue is recognised fully from date of acceptance of risk.
Deferred reinsurance expense.
This item is not recognised for prudential reporting purposes as reinsurance premiums paid are recognised as an expense fully from date of acceptance.
Deferred acquisition costs are expensed fully when paid/payable as a component of underwriting expenses for the purposes of prudential reporting.
The reasons for the changes to the accounting treatment for the areas outlined above are provided below.
Premium Liabilities and Expected Reinsurance Recoveries
AASB 1023 requirements
AASB 1023 does not have a requirement for the recognition and measurement of Premium Liabilities and Expected Reinsurance Recoveries.
APRA requirements
GPS 210 Liability Valuation for General Insurers requires a prospective basis to the recognition and measurement of claims liabilities likely to arise from premium business written. For the purposes of the APRA prudential forms, Premium Liabilities are to be recognised as a liability in GRF 300.0 Statement of Financial Position. In addition the creation of (and movement in) Premium Liabilities is to be recognised and disclosed as a component of claims expense in GRF 310.0 Statement of Financial Performance (i.e. “claims expense attributable to future years”). Under this approach claims expense will have 2 separately identifiable components, one relating to the OCP (current year and prior year claims) and the other relating to the premium liabilities (i.e. relating to future years).
APRA considers that the concept of Premium Liabilities is a more effective means of recognising potential risk over the term of the policy written, compared to the accounting concept of premium ‘earned/unearned’.
Given the prospective basis required by GPS 210 Liability Valuation for General Insurers to measure and recognise Premium Liabilities, it is appropriate to recognise an asset that reflects the level of reinsurance cover associated with the Premium Liabilities recognised. This form of reinsurance recovery is deducted from the Premium Liabilities for the purposes of calculating the insurance capital charge and will be addressed in the actuary’s report. For the APRA prudential forms, this introduces a new asset in the GRF 300.0 Statement of Financial Position (i.e. “Expected Reinsurance Recoveries”) and another reinsurance recovery item in the GRF 310.0 Statement of Financial Performance (i.e. “Expected Reinsurance Recoveries”). Under this approach reinsurance recoveries will have 2 separately identifiable components, one relating to the OCP (current year and prior year claims) and the other relating to the Premium Liabilities (i.e. relating to future years).
Premium Revenue and Unearned Premium Provision
AASB 1023 requirements
Under AASB 1023 premium written is recognised as premium revenue on an earned/unearned basis. That component that is unearned is recognised as a liability – “Unearned Premium Provision”. While the APRA prudential standards have changed the accounting recognition requirements for Outstanding Claims Liabilities and Premium Liabilities, it is silent on the accounting treatment for the recognition of premium revenue.
APRA requirements
It is important to consider the accounting treatment underlying the recognition of Premium Liabilities comparative to that for unearned premium provision, specifically the profit and loss treatment. The earned/unearned basis for recognition of premium revenue prescribed by AASB 1023 is not appropriate for the APRA prudential forms as it is not consistent with the APRA framework for measuring insurance liabilities under GPS 210 Liability Valuation for General Insurers. The objective of the measurement of Premium Liabilities is to recognise potential future claim liabilities arising out of new insurance business written (on a prospective basis). Accordingly to be consistent, it is more appropriate to recognise premiums written up front as premium revenue.
Deferred Acquisition Costs (DAC) and Acquisition Costs
AASB 1023 requirements
DAC is recognised as an asset under AASB 1023 and is amortised as an underwriting expense to the profit and loss over the period to which the costs relate or the benefits from the expenses are to be derived.
APRA requirements
DAC is not permitted to be recognised as an asset under the APRA prudential capital framework. From a prudential accounting perspective it is more appropriate to require DAC to be fully written off as an Acquisition Cost in the GRF 310.0 Statement of Financial Performance. This treatment of DAC is consistent with the proposed treatment for the recognition of premium revenue.
The guidance note to GPS 210 Liability Valuation for General Insurers provides that an insurer may use its unearned premium provision (UPP) less its DAC as approximate method for determining the central estimate of its total Premiums Liabilities after adjusting for the profit margin in the UPP. This is allowed where this is a reasonable approximation of its Premiums Liabilities and does not in itself replace the role of the approved actuary to value Premium Liabilities.
Reinsurance Expense and Deferred Reinsurance Expense
AASB 1023 requirements
Under AASB 1023, expenses/premiums paid for reinsurance cover is required to be recognised as an expense on a basis that is consistent with the pattern of reinsurance. As a result under AASB 1023 this gives rise to the recognition of an asset – “Deferred Reinsurance Expense”, which is amortised (over a specified term/basis) to the Statement of Financial Performance as a reinsurance expense. Under AASB 1023 reinsurance expense is disclosed as an offset from premium revenue in the Statement of Financial Performance.
APRA requirements
Due to the change in the recognition of premium income for prudential reporting purposes (refer above), it is appropriate to recognise reinsurance expense on a consistent basis i.e. recognised fully upfront in the Statement of Financial Performance. As a result, for APRA prudential reporting (and Investment risk charge calculation), there will be no asset titled “Deferred Reinsurance Expense”.
Tax Effect Accounting/Adjustments
It is likely that the recognition of the Premium Liabilities and Outstanding Claims Provisions in accordance with GPS 210 Liability Valuation for General Insurers will give rise to tax effect accounting considerations. The measurement and recognition in the GRF 300.0 Statement of Financial Position of tax effect accounting items (e.g. future income tax benefits) is to be determined in accordance with the requirements of AASB 1020 ‘Tax Effect Accounting’.
If the technical insurance provisions reported in the GRF 300.0 Statement of Financial Position are determined to representing timing differences between recognition as an expense for accounting purposes and as a deductible expense for taxation purposes, then the associated measurement and recognition of taxation expense and deferred tax assets and liabilities is to be determined in accordance with AASB 1020.
Definition of insurance business
Insurers are to follow the definition of insurance business provided in Section 3 of the Act. The Act provides that insurance business means the business of undertaking liability, by way of insurance (including reinsurance), in respect of any loss or damage, including liability to pay damages or compensation, contingent upon the happening of a specified event, and includes any business incidental to insurance business as so defined, but does not include:
(a) Life insurance business;
(b) Accident insurance business undertaken solely in connection with life insurance business;
(c) Pecuniary loss insurance business carried on solely in the course of carrying on banking business and for the purposes of that business by the ADI;
(d) Business in relation to the benefit provided by a friendly society or a trade union for its members or their dependants;
(e) Business in relation to the benefits provided for its members or their dependants by an association of employees of employees and other persons that is an organisation within the meaning of the Workplace Relations Act 1996;
(f) Business in relation to a scheme or arrangement under which superannuation benefits, pensions or payments to employees or their dependants (and not to any other persons) on retirement, disability or death are provided by an employer or an employer’s employees or both, wholly through an organization established solely for that purpose by the employer or the employer’s employees or by both;
(g) Business in relation to a scheme or arrangement for the provision of benefits consisting of:
the supply of funeral, burial or cremation services, with or without the supply of goods connected with any such service; or
the payment of money, upon the death of a person, for the purpose of meeting the whole or a part of the expenses of and incidental to the funeral, burial or cremation of that person; and no other benefits, except benefits incidental to the scheme or arrangement;
(h) business undertaken by a person, being a carrier, carrier’s agent, forwarding agent, wharfinger, warehouseman or shipping agent, relating only to the person’s liability in respect of goods belonging to another person and in the possession, or under the control, of the first-mentioned person for the purpose of the carriage, storage or sale of those goods;
business undertaken by a person, being an innkeeper or lodging-house keeper, relating only to the person’s liability in respect of goods belonging to another person and in the possession or under the control of a guest at the inn or lodging-house of which the first-mentioned person is the innkeeper or lodging-house keeper or deposited with the innkeeper or lodging-house keeper for safe custody;
(j) the business of insuring the property of a religious organization where the person carrying on the business does not carry on any other insurance business; or
(k) business as a registered health benefits organization, a registered medical benefits organization or a registered hospital benefits organization carried on by an organization that is a registered organization within the meaning of Part VI of the National Health Act 1953.
Reinsurance
Where a reinsurance contract does not, despite its form, provide for the transfer of risk against loss or liability from the ceding insurer to the reinsurer, it must not be accounted for as reinsurance, but as a form of financing. The premium paid by the ceding insurer must be recognised as an asset by the ceding insurer and a liability by the reinsurer.
Market value measurement of assets
In addition AASB 1023 requires net market value to be used in measuring assets that are deemed to be ‘integral to the general insurance activities’. However for the purposes of this form market value can be used (i.e. ignore transactions costs).
Market value or fair value has the same meaning as defined in the Australian Accounting standards. Market value is defined for accounting purposes as a subset of fair value, where fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction, and is determined as follows:
The quoted market price in an active and liquid market (i.e. market value); or
When there is infrequent activity in a market, the market is not well established, small volumes are traded relative to the asset or liability to be valued, or a quoted market price is not available – an estimate of a price for the asset or liability in an active and liquid market.
AASB 1023 provides that assets that are deemed not to be ‘integral to the general insurance activities’ of the insurer are able to be valued using historical cost rather than net market value. This basis can be applied for the purposes of this form.
Market value of charged/encumbered assets
If an asset is in any way subject to a charge, covenant, encumbrance, option to purchase or any other arrangement by way of agreement or statute, that restricts the market value of the asset, the market value needs to reflect the existence of these arrangements. For example, if the insurer has agreed to deliver an asset to a purchaser at a price below the arms length market value, the market value cannot exceed the agreed price.
Netting
Unless otherwise specifically stated, institutions are allowed to take advantage of netting agreements in relation to disclosure of data items in this form. Institutions are to comply with the prerequisite for netting outlined in Australian accounting standards notably AASB 1014 ‘Set-off and Extinguishment of Debt’.
Term to maturity
Reference to term to maturity refers to residual term to maturity not original term to maturity.
Related party disclosure
Amounts due from, loans to, debentures of, shares in, or units in a trust or body corporate that is related to the insurer are to be disclosed for items of assets and liabilities where indicated in the form. For the purposes of this form, related bodies corporate are to be interpreted consistently with the meaning as in AASB 1017. AASB 1017 provides that related party means, in relation to a reporting entity any:
(a) other entity that at any time during the financial year, has control or significant influence over the reporting entity; or
(b) other entity that at any time during the financial year, is subject to control or significant influence by the reporting entity; or
(c) other entity that, at any time during the financial year, is controlled by the same entity that controls the reporting entity. Referred to as a situation in which entities are subject to common control; or
(d) other entity that, at any time during the financial year, is controlled by the same entity that significantly influences the reporting entity; or
(e) other entity that, at any time during the financial year, is significantly influenced by the same entity that controls the reporting entity; or
(f) director of the reporting entity or any of their director-related entities; or
(g) director of any other entity identified as a related party under any of paragraphs (a) to (e), or any of their director-related entities;
but excludes any other entity (except those identified as a related party under paragraph (f)) where the related party relationship results solely from normal dealings of:
(h) financial institutions; or
authorised trustee corporations; or
(j) fund managers; or
(k) trade unions; or
(l) statutory authorities; or
(m) government departments; or
(n) local governments[8]
AASB 1017 defines director-related entities as meaning “the spouses of such directors, relatives of such directors or spouses and any other entity under the joint or several control or significant influence of such directors, spouses or relatives”.
Relative in relation to a person is defined in the Corporations Law to mean the spouse, partner, son, daughter, or brother or sister of the person.
[8] Extracted from ICAA Members' Handbook December 2001 issue, AASB 1017.
Instructions for specific items
Assets
Current Assets
Current assets is to be interpreted in accordance with the meaning provided in AASB 1040 ‘Statement of Financial Position’. As a guide AASB 1040 provides that a current asset is an asset that is expected to mature or be realised within a 12 month period.
1.0. Cash and Liquid Assets
This reporting item should be brought to account at the face value or the gross value of the outstanding balance where appropriate. Interest is taken to profit and loss when earned.
1.1. Notes and coins
Include Australian and foreign currency notes and coins of the reporting entity. Notes and coins in transit between any branches or offices of the reporting entity should be reported.
1.2. Money at short call
Include deposits available on demand (11am accounts, money market or 24-hour money), that are used by the Insurer for daily liquidity/operations.
Do not include any deposits at call that are held as part of the Insurer’s investments. These are to be disclosed as Investments in GRF 140.0 Investment – Direct Interest Rate Holdings.
Do not include bank overdraft balances.
1.3. Securities purchased under agreements to resell:
Treatment is to be consistent with International Accounting Standard 39.
Where the transferee of the securities effectively receives a lenders rate of return (i.e. the underlying risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing activities (treating securities borrowing as on balance sheet exposures).
Under this method of accounting, the following treatment is to be applied:
The asset account termed “Securities purchased under agreements to resell”, represents the receivable due from counterparties from whom the securities have been borrowed and with whom cash has been lodged; and
The Insurers physical security holdings/portfolio recorded on the balance sheet are not affected (i.e. increased or decreased by the securities subject to this agreement).
1.4. Total cash and liquid assets
Sum all cash and liquid assets reporting items above (Notes and coins, Deposits at call and Securities purchased under agreements to resell with Related entities and Other entities).
Total cash and liquid assets, which represent:
1.4.1.Cash (defined as cash on hand).
Of the total cash and liquid assets, disclose the aggregate balance that represents cash on hand only.
1.4.2.Debt obligation with a counterparty rating of Grade of 1 or 2.
Of the total cash and liquid assets, disclose the aggregate balance, which represents funds invested with a counterparty that has a rating grade of 1 or 2. Refer to GGN 110.4 Investment Risk Capital Charge Attachment 2 for detail on rating grades.
1.4.3.Debt obligation with a counterparty rating of Grade of 3
Of the total cash and liquid assets, disclose the aggregate balance, which represents funds invested with a counterparty that has a rating grade of 3. Refer to GGN 110.4 Investment Risk Capital Charge Attachment 2 for detail on rating grades.
1.4.4.Debt obligation with a counterparty rating of Grade of 4 or unrated.
Of the total cash and liquid assets, disclose the aggregate balance, which represents funds invested with a counterparty that has a rating grade of 4 or are unrated. Refer to GGN 110.4 Investment Risk Capital Charge Attachment 2 for detail on rating grades.
1.4.5.Debt obligation with a counterparty rating of Grade of 5
Of the total cash and liquid assets, disclose the aggregate balance, which represents funds invested with a counterparty that has a rating grade of 1 or 2. Refer to GGN 110.4 Investment Risk Capital Charge Attachment 2 for detail on rating grades.
1.4.6.Investments with related entities of the reporting insurer
Of the total cash and liquid assets, disclose the aggregate balance that is held with entities related to the reporting insurer. Related entity has the meaning as set out in the start of the instruction guide (page 5).
2.0. Receivables
2.1. Total Investment Income Receivable
Report the total of investment income that is receivable. Investment income receivable will include items such as interest, dividends, rental income, trusts distributions accrued but not yet received.
Investment income receivable from counterparties/assets with rating of:
The aggregate value of Investment income receivable is to be allocated according to the counterparty/asset rating grades set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge. The investment risk charge will be calculated according to the applicable rating grade.
2.1.1. Grade 1 or 2
2.1.2.Grade 3
2.1.3.Grade 4 or unrated
2.1.4.Grade 5
2.1.5.Other
2.2. Recoveries other than reinsurance
Claims recoveries may also consist of recoveries from subrogation, salvage and other. Where such other recoveries are expected to be made they are to be valued in accordance with AASB 1023 and disclosed here.
2.2.1.Provision for doubtful debts
Where applicable, disclose the value of “recoveries other than reinsurance” receivable, where collection/receipt is assessed as doubtful.
2.2.2.Net recoveries receivable
Represents the value of “Recoveries other than reinsurance” receivable, net of any associated provision for doubtful debts.
2.2.2.1. Total net amounts recoverable other than reinsurance recoveries receivable that is reported in item 2.2.2, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than recoveries relating to claims that have been paid).
Of the total value reported in item 2.2.2 for recoveries other than reinsurance recoveries, report the value that relates to claims that are recognised in the value reported for the Outstanding Claims Provision reported as a current liability in item 18 of this form. Exclude recoveries that relate to claims that have been paid.
Net recoveries receivable from counterparties with rating of:
Net value is to be allocated according to the counterparty/asset rating grades of the counterparty from which the recoveries are receivable. The grades are set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
2.2.3.Grade 1 or 2
2.2.4.Grade 3
2.2.5.Grade 4 or unrated
2.2.6.Grade 5
2.2.7.Other
The investment risk charge will be calculated according to the applicable rating grade.
2.3. Premiums receivable
Include all premiums that are due at the reporting date that are due in less than 12 months. Include unpaid premiums available for collection and premiums not yet available for collection. Unpaid reinsurance premiums are also disclosed here.
If the unpaid premium is from a reinsurance contract where a legal right of set-off exists, the amount may be included as an amount recoverable under a reinsurance contract, but only if the amount is the balance after set-off against other amounts owing under that contract. Where no legal right of set-off exists, the unpaid premium from the reinsurance contract is to be shown as an unpaid premium.
All unpaid premiums on such policies are to be disclosed here according to the length of time the premium has been due and the party from whom it was due. The due date is the date of inception or, for instalment premiums the date from when the instalment is owed. Workers’ compensation premium adjustments should be included.
Unpaid instalment premiums are to be reported as unpaid premiums and are to include all unpaid instalments. If any instalment is due for more than 6 months all the unpaid instalments are to be regarded as over 6 months.
For premium aging purposes, inward reinsurance premiums may be aged from the statement (bordereaux) date.
Disclosure of unpaid premiums due for a period of less than 12 months, is required as follows:
2.3.1.Premium receivable in 6 months or less:
Where the premiums are receivable (eg from insurance brokers or other than insurance brokers) during the 6 months immediately preceding the reporting date.
2.3.2.Provision for doubtful debts
Include the value of premiums receivable where collection is considered doubtful (full or partial).
2.3.3.Net premium receivable in 6 months or less
This is the value of the premium receivable 6 months or less after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.3.4.Premium receivable more than 6 months less than or equal to 12 months:
Where the premiums are receivable (e.g. from insurance brokers or other than insurance brokers) more than 6 months but less than 12 months prior to the reporting date.
2.3.5.Provision for doubtful debts
Include the value of premiums receivable where collection is considered doubtful (full or partial).
2.3.6.2.3.6. Net premium receivable more than 6 months less than or equal to 12 months
This is the value of the premium receivable greater than 6 months but less than 12 months after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.3.7.Premium receivable - Unclosed business
Include business written close to balance date where attachment of risk is prior to balance date but there is insufficient information to accurately identify the business.
2.3.8.Provision for doubtful debts
Include the value of premiums receivable where collection is considered doubtful (full or partial).
2.3.9.Net unclosed business receivable
This is the value of the premium receivable associated with unclosed business after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.3.10.Total net premiums receivable
Sum the value of net premium receivables (i.e. points 3.(i) – 3.(iii)).
2.3.11.Total net premiums that are receivable from related parties
Disclose the aggregate value of “Total net premiums receivable” that are due from entities related to the reporting insurer. Related entity has the meaning as set out in the start of the instruction guide (page 5).
2.4. Amounts recoverable on reinsurance contracts and outstanding claims:
Report assets which derive from reinsurance activities, other than unpaid premiums subject to the specific comments where a legal right of set-off exists.
Include the amount due from reinsurers or retrocessionaires. Reinsurance recoverables on outstanding claims is the reinsured portion of the outstanding claims provision to be recovered from reinsurers on settling the outstanding claims provision. Measurement of the outstanding claims is to be in accordance with GPS 210 Liability Valuation for General Insurers (and not in accordance with the requirements of AASB 1023). Accordingly estimation of reinsurance recoveries relating to the outstanding claims provision is to be estimated on a basis similar with the measurement of the claims liabilities to which it relates.
The amount recoverable is to be disclosed between:
2.4.1.From reinsurers with a counterparty rating of Grade 1 or 2.
The grades are set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
2.4.2.Provision for doubtful debts
Include the value of any recoveries where it is determined that collection is considered doubtful (full or partial).
2.4.3.Net amount receivable
This is the value of the reinsurance recoveries after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.4.4.From reinsurers with a counterparty rating of Grade of 3
The grades are set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
2.4.5.Provision for doubtful debts
Include the value of any recoveries where it is determined that collection is considered doubtful (full or partial).
2.4.6.Net amount receivable
This is the value of the reinsurance recoveries after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.4.7.From reinsurers with a counterparty rating of Grade of 4 or unrated
The grades are set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
2.4.8.Provision for doubtful debts
Include the value of any recoveries where it is determined that collection is considered doubtful (full or partial).
2.4.9.Net amount receivable
This is the value of the reinsurance recoveries after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.4.10.From reinsurers with a counterparty rating of Grade of 5
The grades are set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
2.4.11.Provision for doubtful debts
Include the value of any recoveries where it is determined that collection is considered doubtful (full or partial).
2.4.12.Net amount receivable
This is the value of the reinsurance recoveries after deducting any associated provision for doubtful debts disclosed. The net balance is used in the calculation of the applicable investment risk charge.
2.4.13.Total net reinsurance recoveries
Aggregate value of reinsurance recoveries on reinsurance contracts and outstanding claims net of associated provision for doubtful debts (i.e. sum of points 2.4.3; 2.4.6; 2.4.9; 2.4.12].
2.4.14.Total net reinsurance recoveries receivable from related parties
Include the amount of reinsurance recoveries on reinsurance contracts and outstanding claims that are receivable from entities deemed to be related entities of the insurer. For the purposes of this form, related entity has the meaning as set out in the general section of this instruction guide (page 5).
2.4.15.Amounts recoverable on reinsurance contracts that are Outside Australia Assets, but have been approved by APRA as Inside Australia for the purposes of determining the minimum capital requirement.
Report the amount of such items in this field.
2.4.16.Total net amounts recoverable on reinsurance contracts reported in item 2.4.13, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than reinsurance recoveries relating to claims that have been paid).
Of the total value reported in item 2.4.13 for, report the value of reinsurance recoveries that relates to claims that are recognised in the value reported for the Outstanding Claims Provision reported as a current liability in item 18 of this form. Exclude reinsurance recoveries that relate to claims that have been paid.
2.5. Expected reinsurance recoveries on ‘Premium Liabilities’ from reinsurers with a counterparty rating of:
Report the total of Expected Reinsurance recoveries on Premium Liabilities that constitute current assets.
“Expected reinsurance recoveries” is the term used to describe the value of potential future liabilities recognised as “Premium Liabilities” (in accordance with GPS 210 Liability Valuation for General Insurers) that are expected to be recovered under reinsurance contracts.
If the insurer has recognised a doubtful debt provision against a reinsurer for an existing recovery (e.g. in relation to a recovery of paid claims or claims included in the OCP) then the insurer is not able to recognise an Expected Reinsurance Recovery (on Premium Liabilities) associated with that reinsurer. This is because it is not probably that the recovery will be received and also it will not meet the 75% level of sufficiency requirement in GPS 210 Liability Valuation for General Insurer.
Measurement of the premium liabilities must be in accordance with APRA prudential standard GPS 210 Liability Valuation for General Insurers, however the value recognised or reported in the Statement of Financial Position can be greater than that required by GPS 210 Liability Valuation for General Insurers. As part of the process of measuring premium liabilities in accordance with GPS 210 Liability Valuation for General Insurers, an estimate is required of the level of reinsurance recoveries that are expected to be recovered. Accordingly, expected reinsurance recoveries are to be estimated on a basis similar with that required for the measurement of the premium liabilities to which it relates.
“Expected reinsurance recoveries” is to be allocated according to the counterparty grades set out below and in the form, which are detailed in GGN 110.4 Investment Risk Capital Charge.
2.4.1.Grade 1 or 2
2.4.2.Grade 3
2.4.3.Grade 4 or unrated
2.4.4.Grade 5
The investment risk charge will be calculated based on the capital factor applicable to the rating grades.
2.6. Other reinsurance assets receivable from reinsurers
Any other asset, which relates to reinsurance including deposits retained by reinsurers.
Total other reinsurance assets receivable from reinsurers with a counterparty/asset rating of:
The total is to be allocated according to the counterparty grade of the reinsurers set out below and in the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
2.4.1.Grade 1 or 2
2.4.2.Grade 3
2.4.3.Grade 4 or unrated
2.4.4.Grade 5
The investment risk charge will be calculated based on the capital factor applicable to the rating grades.
2.7. GST Receivable
Record the amount of GST that is receivable by the reporting insurer.
2.8. Other receivables
Represents the aggregate value of “Other receivables” other than those disclosed specifically above.
Total Other receivables with a counterparty/asset rating of:
Allocate the value of “Other receivables” of the insurer, other than those specifically detailed in the form, amongst the appropriate rating grade associated with counterparty/asset:
2.4.1.Counterparties with a rating of Grade 1 or 2
2.4.2.Counterparties with a rating of Grade of 3
2.4.3.Counterparties with a rating of Grade of 4 or unrated
2.4.4.Counterparties with a rating of Grade of 5
The investment risk charge will be calculated based on the capital factor applicable to the rating grades.
2.9. Total Receivables
Sum the value of all the receivables sub classifications.
3.0. Investments (relates to GRF 140 series of forms)
Disclose the value of investments that are reported in the investment form series listed below, which are designated as being current assets only. The non-current value of these investments, are to be reported separately in item number 8 “Investments” of this form.
GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge
GRF 140.1 Investments – Direct Equity Holdings and Risk Charge
GRF 140.2 Investments – Direct Property Holdings and Risk Charge
GRF 140.3 Investments – Loans and Advances and Risk Charge
GRF 140.4 Investments – Assets Indirectly Held by the Insurer and Risk Charge
The value of these investments may or may not equate to the value of investments deemed ‘integral to insurance operations’ as defined in AASB 1023 ‘Financial Reporting of General Insurance Activities’. However APRA does not follow this classification basis. AASB 1023 defines Investments integral to the entity's general insurance activities means[9]:
[9] Extracted from ICAA Members' Handbook June 2001 issue, AASB 1023.
(a) in relation to an entity - investments that are controlled by the entity in the conduct of its general insurance activities; and
(b) in relation to a consolidated group - investments controlled by the entities in the economic entity in the conduct of general insurance activities and investments controlled by subsidiaries of those entities.[10]
The aggregate value of investments reported as both current and non-current assets in this form (i.e. item number 3 and 8 of GRF 300.0 Statement of Financial Position), must agree to the aggregate value of investments reported in all the investment specific forms (i.e. GRF 140 series) listed above.
Such investments can be valued at market value which is different from AASB 1023, which requires that investments integral to the entity's general insurance activities must be measured at net market values. However the investments must not be valued at cost, either market value or net market value is to be adopted.
Note: derivative instruments that are used to hedge investments that are included in the above forms are not to be reported in item 3. The current value of derivative instruments are to be separately reported in item number 5.2 of this form.
Any changes in the values at which such investments are measured must be recognised as revenues (or losses) in the GRF 310.0 Statement of Financial Performance and GRF 310.3 Investment and Operating Income and Expense in the reporting period in which the changes occur.
Accounting Standards AASB 1021 ‘Depreciation of Non-Current Assets’ and AASB 1010 ‘Accounting for the Revaluation of Non-Current Assets’ do not apply to such investments.
4.0. Deferred tax assets (Future Income Tax Benefits)
Deferred tax assets or future income tax benefits are defined in accordance with AASB 1020 Accounting for Income Tax (Tax-Effect Accounting).
4.1. Carried forward unused tax losses
Report all future income tax benefits arising out of tax losses in accordance with AASB 1020.
4.2. Attributable to insurance liability provisions (i.e. OCP & Premium Liabilities provisions)
Report all future income tax benefits associated with the provision for outstanding claims liabilities and premium liabilities that satisfy the recognition requirements of AASB 1020 ‘Accounting for Income Tax (Tax effect accounting).
4.3. Other
Report all deferred tax assets other than that disclosed above.
4.4. Total tax assets
Report the total of items 4.1 to 4.3.
5.0. Other Assets
5.1. Prepayments
Reflects payment for services not fully delivered e.g. payments for subscriptions, rental, interest expense.
5.2. Unrealised Gain on Derivatives
For general insurers derivative financial instruments will be recorded at fair/market value or net fair/market value based on quoted market prices, broker or dealer price quotations. For the purposes of this form, record a positive revaluation amount of a derivative financial contract as unrealised gain on derivatives. Likewise a negative revaluation amount is to be recorded as a current liability - ‘unrealised loss on derivatives’ under the heading “Other Liabilities”.
5.3. Other
Report the value of any other asset that has not been disclosed above.
5.4. Total other assets
Sum all the reporting items listed under “Other assets”.
Total other assets excluding unrealised gain on derivatives, with a counterparty/asset rating of:
Note: The calculation of the appropriate prudential standard investment risk charge for Derivative exposures is calculated in the form headed “Derivatives Activity and Risk Charge”. Accordingly it is necessary to exclude unrealised gain on derivatives from this table otherwise it will be subject to an additional investment risk charge.
Allocate the value of “Other Assets excluding unrealised gain on derivatives” amongst the appropriate rating grade associated with counterparty/asset:
5.4.1.Grade 1 or 2
5.4.2.Grade 3
5.4.3.Grade 4 or unrated
5.4.4.Grade 5
5.4.5.Other
The investment risk charge will be calculated based on the capital factor applicable to the rating grades.
6.0. Total Current Assets
Sum of asset categories; Cash and Liquid assets, Receivables, Investments integral to insurance operations, Deferred Tax Assets and Other assets.
Non Current Assets
Non current assets is to be interpreted in accordance with the meaning provided in AASB 1040 ‘Statement of Financial Position’. As a guide, AASB 1040 provides that a non current asset is an asset that is expected to be held, mature or not to be released for a period greater than 12 months.
7.0. Receivables
7.1. Recoveries other than reinsurance
Claims recoveries may also consist of recoveries from subrogation, salvage and other. Where such recoveries are expected to be made on claims outstanding they are to be valued in accordance with AASB 1023 and disclosed here.
7.1.1.Provision for doubtful debts
Where applicable, disclose the value of “recoveries other than reinsurance” receivable, where collection/receipt is assessed as doubtful.
7.1.2.Net recoveries other than reinsurance receivable
Represents the value of “Recoveries other than reinsurance” receivable, net of any associated provision for doubtful debts.
7.1.2.1. Total net amounts recoverable other than reinsurance recoveries receivable that is reported in item 7.1.2, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than recoveries relating to claims that have been paid).
Of the total value reported in item 7.1.2 for recoveries other than reinsurance recoveries, report the value that relates to claims that are recognised in the value reported for the Outstanding Claims Provision reported as a non-current liability in item 27 of this form. Exclude recoveries that relate to claims that have been paid.
Net recoveries receivable from counterparties with rating of:
Net value is to be allocated according to the counterparty/asset rating grades of the counterparty from which the recoveries are receivable. The grades are set out below and on the form, which are detailed in Attachment 2 of GGN 110.4 Investment Risk Capital Charge.
7.1.3.Grade 1 or 2
7.1.4.Grade 3
7.1.5.Grade 4 or unrated
7.1.6.Grade 5
7.1.7.Other
The investment risk charge will be calculated according to the applicable rating grade.
7.2. Premiums receivable greater than or equal to 12 months
Include all premiums that are receivable at the reporting date for a period of 12 months or greater. Include unpaid premiums available for collection and premiums not yet available for collection. Unpaid reinsurance premiums are also disclosed here. If the unpaid premium is from a reinsurance contract where a legal right of set-off exists, the amount may be included as an amount recoverable under a reinsurance contract, but only if the amount is the balance after set-off against other amounts owing under that contract. Where no legal right of set-off exists, the unpaid premium from the reinsurance contract is to be shown as an unpaid premium.
All unpaid premiums on such policies are to be disclosed here according to the length of time the premium has been due and the party from whom it was due. The due date is the date of inception or, for instalment premiums the date from when the instalment is owed. Workers’ compensation premium adjustments should be included.
Unpaid instalment premiums are to be reported as unpaid premiums and are to include all unpaid instalments. If any instalment is due for more than 12 months all the unpaid instalments are to be regarded as over 12 months.
12.2 Attributable to insurance liabilities (i.e. OCP and Premium liabilities provisions)
Report all future income tax benefits associated with the provision for outstanding claims liabilities and premium liabilities that satisfy the recognition requirements of AASB 1020 Accounting for Income Tax.
12.3 Other
Report all deferred tax assets other than that disclosed above.
12.4 Total deferred tax assets
Aggregate of 12.1 – 12.3.
13.0. Total Other Assets
Report the value of any other asset that has not been disclosed above.
13.1. Unrealised Gain on Derivatives
For general insurers derivative financial instruments will be recorded at fair/market value or net fair/market value based on quoted market prices, broker or dealer price quotations. For the purposes of this form, record a positive revaluation amount of a derivative financial contract as unrealised gain on derivatives. Likewise a negative revaluation amount is to be recorded as either a current or non-current liability - ‘unrealised loss on derivatives’ under the heading “Other Liabilities”.
13.2. Other
Report the value of any other asset that has not been disclosed above.
13.3. Total other assets
Sum all the reporting items listed under “Other assets”.
Total other assets excluding Unrealised gain on derivatives, with a counterparty/asset rating of:
Note: The calculation of the appropriate prudential standard investment risk charge for Derivative exposures is calculated in the form headed “Derivatives Activity and Risk Charge”. Accordingly it is necessary to exclude unrealised gain on derivatives from this table otherwise it will be subject to an additional investment risk charge.
Allocate the value of “Other Assets excluding unrealised gain on derivatives” amongst the appropriate rating grade associated with counterparty/asset:
13.3.1.Grade 1 or 2
13.3.2.Grade 3
13.3.3.Grade 4 or unrated
13.3.4.Grade 5
13.3.5.Other
The investment risk charge will be calculated based on the capital factor applicable to the rating grades.
14.0. Total non-current assets
Sum Receivables, Investments integral to insurance operations, Other investments, Plant & equipment, Intangibles, Other assets.
15.0. Total Assets
Sum total current assets and total non-current assets.
Liabilities
Current Liabilities
Current liabilities are to be interpreted in accordance with the meaning provided in AASB 1040 ‘Statement of Financial Position’. As a guide, AASB 1040 provides that a current liability is a liability that is expected to be paid, settled or extinguished within a period of 12 months from the reporting date).
16.0. Creditors and accruals
16.1. GST Payable
Report the value of GST that is payable by the reporting insurer.
16.2. Creditors and accruals
Include the total of creditors and accruals, including account payables. Do not include overdrafts here, these should be disclosed as Borrowings.
16.3. Total creditors and accruals
16.3.1. Total creditors and accruals payable to related entities.
Include the total of creditors and accruals that are payable to related entities on the Insurer. Related entity has the meaning as set out in the start of the instruction guide (page 5).
17.0. Amounts due on reinsurance contracts
Include the net amount payable by the insurer to reinsurers or retrocessionaires where a legal right of set-off exists. This reflects the current working balance due for settlement. Include premiums payable but not yet due for payment under the terms of the reinsurance contracts and deposits withheld from reinsurers. Include items such as the reinsurer’s portion of recoveries and salvage and commissions due to reinsurers.
17.1. Amounts due on reinsurance contracts which are payable to related entities
Include the total of amounts due on reinsurance contracts that are payable to related entities on the Insurer. Related entity has the meaning as set out in the start of the instruction guide (page 5).
18.0. Outstanding Claims Provision
This is the insurer’s liability for outstanding claims and recognises the potential cost to the insurer of settling claims which it has incurred at the reporting date but which have not been finalised. The amount reported is to be that amount provided by the insurer (e.g. this can be the amount provided in accordance with AASB 1023 or GPS 210 Liability Valuation for General Insurers), however the amount can not be less than the amount as required by GPS 210 Liability Valuation for General Insurers.
Note:
The amount of total outstanding claims provision provided in GRF 300.0 Statement of Financial Position (total of current and non-current OCP liabilities) can be greater than or equal to the amount of claims liabilities (i.e. OCP) reported in form titled “Outstanding Claims Provision and Insurance Risk Charge”, however it must not be less than this amount.
Any excess of OCP provided for in the Statement of Financial Position above that amount required by GRF 300.0 Statement of Financial Position (and Form titled “Outstanding Claims Provision and Insurance Risk Charge”) is able to be added back to Tier 1 capital in GRF 120.0 Determination of Capital Base for the purposes of calculating the capital adequacy/solvency.
The outstanding claims provision must be stated without deducting reinsurance and other recoveries (these are disclosed as an asset as reinsurance receivables).
The liability is in respect of both direct business and inward reinsurance business and must take into account unpaid claims, unreported claims, adjustments for claims development and claims incurred but not enough reported and the direct and indirect claims settlement costs that the insurer expects to incur in settling its outstanding claims.
18.1 Total Outstanding Claims Provision which is associated with claims/settlements in a currency other than the Australian currency.
This requests the disclosure of the amount of claims that have been recognised in the outstanding claims provision, that are ultimately going to be settled or paid in a currency other than the Australian currency.
19.0. Premium Liabilities
This represents the liability of the insurer to provide a service (insurance cover) in the future for which it has received or is owed premiums.
For short tail business, the Premiums Liabilities are of greater relative significance. The value of the Premiums Liabilities must include an amount in respect of the internal expenses that the insurer expects to incur in administering the policies and settling the relevant claims. The Premiums Liabilities are to be determined on a fully prospective basis and can be at an amount provided by the insurer, which can be greater than but not less than the amount required by GPS 210 Liability Valuation for General Insurers.
Note:
The amount of total premium liabilities provided in the GRF 300.0 Statement of Financial Position (total of current and non-current premium liabilities) can be greater than or equal to the amount of premium liabilities reported in the form Statement of Premium Liabilities and Risk Charge, however it must not be less.
Any excess of premium liabilities provided for in GRF 300.0 Statement of Financial Position above that amount required by GRF 300.0 Statement of Financial Position (and the form Statement of Premium Liabilities and Risk Charge) is able to be added back to Tier 1 capital in GRF 120.0 Determination of Capital Base for the purposes of calculating the capital adequacy/solvency.
20.0. Borrowings
Include
Securities sold under agreements to repurchase;
Subordinated loans with a residual maturity of less than 12 months;
Short-term intragroup loans;
Treasury related short-term borrowings from banks;
Promissory notes with a residual maturity of less than 12 months; and
Commercial paper with a residual maturity of less than 12 months.
Exclude
Subordinated loans, promissory notes, commercial paper with a residual maturity greater than 12 months.
20.1. Securities sold under agreements to repurchase
Treatment is to be consistent with International Accounting Standard 39.
Where the transferee of the securities effectively receives a lenders rate of return (i.e. the underlying risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing activities (treating securities borrowing as on balance sheet exposures).
Under this method of accounting, the following treatment is to be applied:
The liability account termed “Securities sold under agreements to repurchase”, represents the payable due to counterparties with whom the securities have been transferred (lent) and from whom cash has been lodged.
The insurer’s physical security holdings/portfolio recorded on the balance sheet are not affected (i.e. decreased by the securities subject to this agreement).
Disclosure of “Securities sold under agreements to repurchase” into related parties, includes entities such as the parent entity, other entities within the same economic group, controlled entities of the reporting Licensed Insurer and of the Licensed insurer’s parent entity, associated entities, joint ventures.
20.2. Finance Lease Liability
Report the value of finance lease liability to be payable less than 12 months.
20.3. Overdraft
Any bank overdraft taken out by the insurer is to be disclosed along with any bank trading account credit balances.
20.4. Securities Issued (e.g. Promissory notes/commercial paper)
Report all borrowings by the reporting entity in the form of commercial paper, promissory notes and other forms of securities issued by the insurer. Commercial paper or promissory notes are short-term debt securities usually issued with an original term to maturity of less than 180 days.
Include all notes/securities issued with a residual term to maturity of 12 months or less. Commercial paper or promissory notes with a residual maturity greater than 12 months should be reported as “non-current liability - borrowings”.
20.5. Term loans:
20.5.1Term loans with variable interest rate
Report all borrowings by the reporting entity in the form of variable interest rate short-term loans. A loan is considered to be short-term if its residual term to maturity is 12 months or less.
20.5.2Term loans with fixed interest rate
Report all borrowings by the reporting entity in the form of fixed interest rate short-term loans. A loan is considered to be short-term if its residual term to maturity is of 12 months or less.
20.6. Total borrowings
Sum the component parts listed under “Borrowings”.
Total borrowings which are:
20.6.1. Payable to the Parent Entity
Of the total amount reported for Borrowings identify the component that is payable or due to the Parent Entity of the Insurer. This item is not included in the calculation of “Total Current Liabilities”.
20.6.1.1. Total borrowings payable to controlled entities on the parent entity
Of the total amount reported for Borrowings identify the component that is payable to controlled entities of the parent insurer. This item is not included in the calculation of “Total Current Liabilities”.
20.6.2. Payable to other related entities
Of the total amount reported for Borrowings identify the component that is payable to other related entities of the Insurer not separately disclosed above. Related entity has the meaning as set out in the start of the instruction guide (page 5). This item is not included in the calculation of “Total Current Liabilities”.
20.6.3. Secured against assets of the Insurer
Of the total amount reported for Borrowings identify the component that is secured against assets of the insurer. This item is not included in the calculation of “Total Current Liabilities”.
20.6.4. Denominated in a currency other than Australian currency
Of the total amount reported for Borrowings identify the component that is denominated in a currency other than the Australian currency. This item is not included in the calculation of “Total Current Liabilities”.
21.0. Income Tax Liability
21.1. Provision for income tax
This is defined, measured and recognised in accordance with AASB 1020 ‘Accounting for Income Taxes’.
21.2. Provision for deferred income tax
This is defined, measured and recognised in accordance with AASB 1020 ‘Accounting for Income Taxes’.
21.3. Total Income Tax Liability
Sum the income tax liability items.
22.0. Provisions
22.1. Dividends
A provision for dividends is the allowance that the reporting entity has made in terms of the obligation for declared dividends.
22.2. Employee entitlements
This includes provisions for long service leave, annual leave, staff housing loan benefits, health fund subsidy and other employee entitlements. The value of employee entitlements should be measured and recognised in accordance with the requirements of AASB 1028 ‘Accounting for Employee Entitlements’.
22.3. Restructuring costs
Report all provisions raised for the restructuring of an organisation, including:
Severance, termination and redundancy payments; and
Integration costs.
22.4. Other
Report all other provisions not identified above.
22.5. Total Provisions
Sum all the “provisions” reporting items.
23.0. Other Liabilities
23.1. Unrealised loss on derivatives
For general insurers derivative financial instruments will be recorded at fair/market value or net fair/market value based on quoted market prices, broker or dealer price quotations. For the purposes of this form, record a negative revaluation amount of a derivative financial contract as unrealised loss on derivatives. Likewise a positive revaluation amount is to be recorded as a current asset - ‘unrealised gain on derivatives’ under the heading “Other Assets”.
23.2. Other liabilities
Record other current liabilities that are not able to be classified into the specific categories listed on the form.
23.3. Total Other Liabilities
Represents the total for ‘Unrealised loss on derivatives’ and ‘Other’.
24.0. Total Current Liabilities
Sum of the balances disclosed at Creditors & accruals, Claims Liabilities, Premium Liabilities, Borrowings, Income Tax liability and Provisions
Non-Current Liabilities
Non current liabilities is to be interpreted in accordance with the meaning provided in AASB 1040 ‘Statement of Financial Position’. As a guide, AASB 1040 provides that a non-current liability is a liability that is expected to be paid, settled or extinguished within a period exceeding 12 months from the reporting date.
25.0. Creditors
25.1. Total creditors and accruals
Include the total of creditors and accruals, including account payables.
25.5.1.Total creditors and accruals which are payable to related entities.
Include the total of creditors and accruals that are payable to related entities on the Insurer. Related entity has the meaning as set out in the start of the instruction guide (page 5).
26.0. Amounts due on reinsurance contracts
Include the net amount payable by the insurer to reinsurers or retrocessionaires where a legal right of set-off exists. This reflects the current working balance due for settlement. Include premiums payable but not yet due for payment under the terms of the reinsurance contracts and deposits withheld from reinsurers. Include items such as the reinsurer’s portion of recoveries and salvage and commissions due to reinsurers.
26.1. Amounts due on reinsurance contracts which are payable to related entities
Include the total of amounts due on reinsurance contracts that are payable to related entities on the Insurer. Related entity has the meaning as set out in the start of the instruction guide (page 5).
27.0. Outstanding Claims Provision
This is the insurer’s liability for outstanding claims and recognises the potential cost to the insurer of settling claims which it has incurred at the reporting date but which have not been finalised. The amount reported is to be that amount provided by the insurer (e.g. this can be the amount provided in accordance with AASB 1023 or GPS 210 Liability Valuation for General Insurers), however the amount can not be less than the amount as required by GPS 210 Liability Valuation for General Insurers.
Note:
The amount of total outstanding claims provision provided in GRF 300.0 Statement of Financial Position (total of current and non-current OCP liabilities) can be greater than or equal to the amount of claims liabilities (i.e. OCP) reported in the form “Outstanding Claims Provision and Insurance Risk Charge”, however it must not be less than this amount.
Any excess of OCP provided for in GRF 300.0 Statement of Financial Position above that amount required by GPS 210 Liability Valuation for General Insurers (and the form Outstanding Claims Provision and Insurance Risk Charge”) is able to be added back to Tier 1 capital in GRF 120.0 Determination of Capital Base for the purposes of calculating the capital adequacy/solvency.
27.1. Total Outstanding Claims Provision which is associated with claims/settlements other than the Australian currency.
This requests the disclosure of the amount of claims that have been recognised in the outstanding claims provision, that are ultimately going to be settled or paid in a currency other than the Australian currency.
28.0. Premium Liabilities
This represents the liability of the insurer to provide a service (insurance cover) in the future for which it has received or is owed premiums.
For short tail business, the Premiums Liabilities are of greater relative significance. The value of the Premiums Liabilities must include an amount in respect of the internal expenses that the insurer expects to incur in administering the policies and settling the relevant claims. The Premiums Liabilities are to be determined on a fully prospective basis and can be at an amount provided by the insurer, which can be greater than but not less than the amount required by GPS 210 Liability Valuation for General Insurers.
Note:
The amount of total premium liabilities provided in the Statement of Financial Position (total of current and non-current premium liabilities) can be greater than or equal to the amount of premium liabilities reported in form titled “Statement of Premium Liabilities and Risk Charge”, however it must not be less.
Any excess of premium liabilities provided for in GRF 300.0 Statement of Financial Position above that amount required by GPS 210 Liability Valuation for General Insurers (and the form “Statement of Premium Liabilities and Risk Charge”) is able to be added back to Tier 1 capital in GRF 120.0 Determination of Capital Base for the purposes of calculating the capital adequacy/solvency.
29.0. Borrowings
Includes borrowings with a residual term to maturity of more than one year. This includes loans and debt securities.
29.1. Finance lease liability
Report the value of finance lease liability that is payable greater than 12 months from balance date.
29.2. Securities Issued
Report all borrowings by the reporting entity in the form of securities issued by the insurer, with a residual term to maturity greater than 12 months. Measurement is to be consistent with Australian accounting standards and AASB 1023.
As a guide include:
Bonds;
Debentures;
unsecured notes;
fixed-interest securities;
medium-term notes (MTNs);
inflation-indexed bonds;
floating-rate notes (FRNs);
other floating-rate debt securities;
asset-backed bonds; and
subordinated bonds and notes.
As a guide exclude:
hybrid securities;
negotiable and transferable certificates of deposit; and
Securities that have been disclosed as current Borrowings (i.e. residual maturity of less than 12 months).
29.3. Term Loans
Include:
secured and unsecured borrowings;
term loans;
mortgages;
equity participation in leveraged leases; and
loans to controlled entities and associates.
Exclude:
loan capital (e.g. subordinated loans); and
short-term loans reported as current Borrowings.
29.3.1.Term loans at variable interest rates
Report all borrowings by the reporting entity in the form of variable interest rate short-term loans. A loan is considered to be short-term if its residual term to maturity is greater than 12 months.
29.3.2.Term loans at fixed interest rates
Report all borrowings by the reporting entity in the form of fixed interest rate short-term loans. A loan is considered to be short-term if its residual term to maturity is greater than 12 months.
29.4. Total borrowings
Sum the component parts listed under “Borrowings”.
Total borrowings which are:
29.4.1.Payable to the Parent Entity
Of the total amount reported for Borrowings identify the component that is payable or due to the Parent Entity of the Insurer. This item is not included in the calculation of “Total non-Current Liabilities”.
29.4.1.1 Total borrowings payable to controlled entities of the parent entity
Of the total amount reported for Borrowings identify the component that is payable to controlled entities of the parent Insurer. This item is not included in the calculation of “Total non-Current Liabilities”.
29.4.2.Payable to other related entities
Of the total amount reported for Borrowings identify the component that is payable to other related entities of the Insurer not separately disclosed above. Related entity has the meaning as set out in the start of the instruction guide (page 5). This item is not included in the calculation of “Total non-current Liabilities”.
29.4.3.Secured against assets of the Insurer
Of the total amount reported for Borrowings identify the component that is secured against assets of the Insurer. This item is not included in the calculation of “Total non-current Liabilities”.
29.4.4. Denominated in a currency other than Australian currency
Of the total amount reported for Borrowings identify the component that is denominated in a currency other than the Australian currency. This item is not included in the calculation of “Total non-current Liabilities”.
30.0. Income Tax Liability
30.1. Provision for deferred income tax
This is defined, measured and recognised in accordance with AASB 1020 ‘Accounting for Income Taxes’.
30.2. Total Income Tax Liability
Sum the income tax liability items.
31.0. Provisions
31.1. Dividends
A provision for dividends is the allowance that the reporting entity has made in terms of the obligation for declared dividends.
31.2. Employee entitlements
This includes provisions for long service leave, annual leave, staff housing loan benefits, health fund subsidy and other employee entitlements. The value of employee entitlements is to be reported in accordance with the requirements of AASB 1028 ‘Accounting for Employee Entitlements’.
31.3. Restructuring costs
Report all provisions raised for the restructuring of an organisation, including:
Severance, termination and redundancy payments; and
Integration costs.
31.4. Other
Report all other provisions not identified above.
31.5. Total Provisions
Sum all the “provisions” reporting items.
32.0. Loan capital and hybrid securities
Report the value of all loan capital and hybrid securities that have been issued by the Insurer and have a residual term to maturity of more than one year. Classification is to be consistent with AASB 1033 ‘Presentation and Disclosure of Financial Instruments’.
32.1. Loan capital
As a guide may include:
subordinated loans of a residual maturity of more than one year
32.2. Hybrid securities
As a guide may include:
converting preference shares; and
convertible notes.
32.3. Total Loan capital and hybrid securities
Total all Loan capital and hybrid securities items listed above.
Total Loan capital and hybrid securities which are:
32.3.1.Payable to the Parent Entity
Of the total amount reported for Loan capital and hybrid securities identify the component that is payable or due to the Parent Entity(s) of the Insurer. This item is not included in the calculation of “Total Non-Current Liabilities”.
32.3.1.1.Payable to controlled entities of the Parent Entity
Of the total amount reported for Loan capital and hybrid securities identify the component that is payable to controlled entities of the Parent Entity. This item is not included in the calculation of “Total Non-Current Liabilities”.
Note: This is not applicable for GRF 300.0 Statement of Financial Position for the Consolidated Insurance Group.
32.3.2.Payable to other related entities
Of the total amount reported for Loan capital and hybrid securities identify the component that is payable to other related entities of the Insurer not separately disclosed above. Related entity has the meaning as set out in the start of the instruction guide (page 5). This item is not included in the calculation of “Total Non-Current Liabilities”.
32.3.3.Secured against assets of the Insurer
Of the total amount reported for Loan capital and hybrid securities identify the component that is secured against assets of the Insurer. This item is not included in the calculation of “Total Non-Current Liabilities”.
32.3.4.Denominated in a currency other than Australian currency
Of the total amount reported for Loan capital and hybrid securities identify the component that is denominated in a currency other than the Australian currency. This item is not included in the calculation of “Total Non-Current Liabilities”.
33.0. Total Non-Current Liabilities
Sum all the non-current liability sub-classifications, excluding the “of which” disclosure.
34.0. Total liabilities
Sum the total of current and non-current liabilities.
35.0. Net assets
Subtract total liabilities from total assets.
Net assets represented by:
(Note: for the Inside Australia reporting unit, the Net Assets does not necessarily have to balance with the total for Reserves. This situation may arise where not all assets, liabilities and reserves are Inside Australia).
36.0. Reserves
Other Reserves
Include all reserves not separately identified above. Report dividend reinvestment plan reserve in this reporting item.
Total Reserves
Sum the reporting items listed under “Reserves”.
36.1. General reserves
This is derived from revenue profits and is mostly available for dividend payment.
36.2. Capital profits reserves
A Capital Profits Reserve represents the realised value of revaluations associated with an asset or class of assets that have been disposed of. These assets have been subject to the fair value basis of measurement and revaluations accounted for in accordance with accounting standard AASB 1041 ‘Revaluation of Non-Current Assets’. Due to the disposal of these assets, the balance of the Asset Revaluation Reserve associated with these assets has been transferred to a capital profits reserve.
36.3. Asset Revaluation Reserve
Note: if the insurer does not use the cost method to value asset that are not deemed to constitute investments integral to general insurance activities, then these items are not applicable to the insurer. Only complete these if the insurer uses these accounts for its financial reporting.
36.3.1.Intangibles
Include balance of the asset revaluation reserve relating to the revaluation of intangible assets.
36.3.2.Investments in associates/Share of associates ARR
Include the balance of the asset revaluation reserve relating to the revaluation of investments in associates
36.3.3.Other
Asset revaluation reserve relating to the revaluation of other assets.
36.3.4.Total Asset Revaluation Reserve
Sum of the components of the Asset Revaluation Reserve.
36.4. Foreign Currency Translation Reserve
Include the exchange rate differences arising on translation of assets and liabilities where those assets and liabilities are not valued at market value.
36.5. Other Reserves
Include all reserves not separately identified above. Report dividend reinvestment plan reserve in this reporting item.
36.6. Total Reserves
Sum the reporting items listed under “Reserves”.
37.0. Retained profits
37.1. Retained profits or accumulated losses at the end of the period
Represents the sum of opening balance of retained profits or accumulated losses at the beginning of the period plus current profit or loss after tax and extraordinary items for the reporting period and after any transfers to or from reserves, calculated in GRF 310.0 Statement of Financial Performance.
38.0. Total
Total shareholders’ equity
Represents the sum of “Total reserves” and “Retained profits”.
39.0. Additional Disclosure required for Minimum Capital Requirement calculation:
39.1.Technical insurance liability provisions in excess of liability valuation required by GPS 210.
Include in this item the value of technical insurance provisions (Premium Liabilities and Outstanding Claims Liabilities) that are recognised in GRF 300.0 Statement of Financial Position, that are in excess of the technical provisions required by GPS 210 Liability Valuation for General Insurers (i.e. the aggregate values reported in GRF 210.0 Outstanding Claims Provision – Insurance Risk Charge and GRF 210.1 Premium Liabilities – Insurance Risk Charge).
This must be calculated on a net basis as per the following:
The following calculates the total Outstanding Claims Provision and Premium Liabilities net of Reinsurance Recoveries as reported in GRF 300.0 Statement of Financial Position:
Sum of the insurance liabilities:
Item 18. OCP – Current Liabilities; plus
Item 27. OCP – Non-current Liabilities; plus
Item 19. Premium Liabilities – Current Liabilities; plus
Item 28. Premium Liabilities – Non-current Liabilities;
Less sum of reinsurance and non reinsurance recoveries:
2.4.16 Total net amounts recoverable on reinsurance contracts reported in item 2.4.13, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than reinsurance recoveries relating to claims that have been paid) – Current Assets; plus
7.3.16 Total net amounts recoverable on reinsurance contracts reported in item 7.3.13, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than reinsurance recoveries relating to claims that have been paid) contracts – Non-current Assets; plus
Item 2.5. Expected reinsurance recoveries on 'Premium Liabilities – Current Assets; plus
Item 7.4. Expected reinsurance recoveries on 'Premium Liabilities – Non-current Assets; plus
2.2.2.1 Total net amounts recoverable other than reinsurance recoveries receivable that is reported in item 2.2.2, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than recoveries relating to claims that have been paid) Liabilities' – Current Assets; plus
7.1.2.1 Total net amounts recoverable other than reinsurance recoveries receivable that is reported in item 7.1.2, that relate to claims recognised in the calculation of the Outstanding Claim Provision (i.e. other than recoveries relating to claims that have been paid) – Non-current Assets
Total OCP and Premium Liabilities net of Reinsurance and non Reinsurance Recoveries per form GRF 300.0 Statement of Financial Position – Licensed Insurer as calculated by the above:
Less the sum of the insurance liabilities net of reinsurance and non reinsurance recoveries per the following:
GRF 210.0 OCP and Risk Charge – ‘Total "Net" OCP (OCP Net of Reinsurance and non reinsurance Recoveries) for all classes of business; plus
GRF 210.1 Premium Liabilities and Risk Charge - ‘Total "Net" Premium Liabilities (Premium Liabilities Net of Expected Reinsurance and non reinsurance Recoveries) for all classes of business.
Where the excess is positive, this is reported in Item 39.1. Technical provisions in excess of liability valuation.
Note:
If the technical insurance provisions recognised by the insurer in GRF 300.0 Statement of Financial Position are less than the value required by GPS 210 Liability Valuation for General Insurers (and by GRF 210.0 OCP and Risk Charge and GRF 210.1 Premium Liabilities and Risk Charge), the amount of the deficiency must be recognised in GRF 310.0 Statement of Financial Performance as a claims expense (either relating to Premium Liabilities or Outstanding Claims Provision). The reduction in retained earnings at the end of the reporting period calculated in GRF 310.0 Statement of Financial Performance is then included in GRF 300.0 Statement of Financial Position.
Essentially the total (net) OCP and Premium Liabilities recognised in GRF 300.0 Statement of Financial Position - Licensed Insurer can not be less than the total OCP and Premium Liabilities per GRF 210.0 OCP and Risk Charge and GRF 210.1 Premium Liabilities and Risk Charge.
39.2.Tax effect of technical insurance liability provisions in excess of the liability valuation required by Prudential Standard GPS 210.
Report the tax effect of the excess technical insurance provisions (as provided in this form over the level required by GPS 210 Liability Valuation for General Insurers). The excess in technical provisions may be included as Tier 1 capital.
Note: this requirement is not mandating the recognition of a deferred tax asset (or FITB) in GRF 300.0 Statement of Financial Position. This adjustment is required purely for prudential capital purposes to derive the accounting after tax cost to capital of creating the excess insurance provision.
The recording of the tax effect is not required where the excess technical insurance provision has been included in the recognition of a deferred tax asset (or FITB) associated with the recognition of Premium Liabilities and Outstanding Claims Liabilities in GRF 300.0 Statement of Financial Position. Deducting the tax effect in this case would constitute double counting, as FITBs are deducted from Net Assets inside Australia.
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