Financial Sector (Collection of Data) (reporting standard) determination No. 29 of 2007 LRS 420.0 Assets Backing Policy Liabilities (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No.29 of 2007
Reporting standard LRS 420.0 Assets Backing Policy Liabilities
Financial Sector (Collection of Data) Act 2001
I, John Roy Trowbridge, Member of APRA, delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) DETERMINE Reporting Standard LRS 420.0 Assets Backing Policy Liabilities in the form set out in the Schedule, which applies to the financial sector entities referred to 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 financial sector entities on 1 January 2008.
Dated 6 December 2007
[Signed]
John Trowbridge
Member
Interpretation
In this determination:
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard LRS 420.0 Assets Backing Policy Liabilities comprises the 12 pages commencing on the following page.
Reporting Standard LRS 420.0
Assets Backing Policy Liabilities
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001. It requires all registered life insurance companies which are not friendly societies to report to APRA, in general, on an annual basis in relation to assets backing policy liabilities.
This reporting standard outlines the overall requirements for the provision of relevant information to APRA. It should be read in conjunction with Form LRF 420.0 Assets Backing Policy Liabilities, and the associated instructions (both of which are attached and form part of this reporting standard).
Purpose
Information collected in Form LRF 420.0 Assets Backing Policy Liabilities (LRF 420.0) is used by APRA for the purpose of prudential supervision, including assessing compliance with prudential standards and actuarial standards where appropriate. It may also be used by the Reserve Bank of Australia, the Australian Bureau of Statistics and the Australian Securities and Investments Commission.
Application
This reporting standard applies to all life insurance companies which are not friendly societies and which are registered under the Life Insurance Act 1995 (Life Insurance Act).
Information required
A life company which is not a friendly society must provide APRA with the information required by Form LRF 420.0 for each reporting period.
Note: the instructions for Form LRF 420.0 explain in more detail the information that is required.
The information required to be provided to APRA under this reporting standard is not intended to form part of the financial statements or the annual returns, within the meaning of section 124 of the Life Insurance Act, given by the life company to APRA.
Method of submission
The information required by this reporting standard must be given to APRA either:
(a) in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or
(b) by completing Form LRF 420.0 on paper and mailing the completed form to APRA
Note: the ‘Direct to APRA’ application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 7, a life company which is not a friendly society must provide the information required by this reporting standard in audited form in respect of the financial year of the life company.
Note: the annual audited form must be submitted in conjunction with the annual auditor’s report, as required under LPS 310 Paragraph 8.
APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular life company which is not a friendly society, to require it to provide the information required by this reporting standard more frequently, or less frequently, having regard to:
(a)the particular circumstances of the life company;
(b)the extent to which the information is required for the purposes of the prudential supervision of the life company; and
(c)the requirements of the Reserve Bank of Australia or the Australian Bureau of Statistics or the Australian Securities and Investments Commission.
The information required by this reporting standard must be provided to APRA within four months after the end of the reporting period to which the information relates.
APRA may grant a life company which is not a friendly society 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 a life company which is not a friendly society under this reporting standard must be the product of processes and controls that have been reviewed and tested by the auditor of the life company.
All information provided by a life company which is not a friendly society under this reporting standard must be subject to processes and controls developed by the life company for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the life company to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Information provided to APRA in audited form must be audited by the auditor of the life company.
Actuarial valuations and calculations included in, or used in the preparation of, the information provided to APRA must be in accordance with the actuarial standards and prudential standards in force for the reporting period.
Authorisation
If the officer of a life company provides the information required by this reporting standard:
(a)using Direct to APRA (D2A), the officer must digitally authorise, submit the data to APRA and receive a D2A receipt number for the information to be considered given to APRA. APRA will issue ‘digital certificates’ to officers of the life company who have authority to transmit the data to APRA; or
(b)on paper, the relevant completed form must be signed on the front page by the principal executive officer or chief financial officer of the life company.
Note: information in draft returns saved at APRA using D2A will not be considered to be provided to APRA for the purposes of the life company's obligations under this reporting standard.
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 in writing each life company which is not a friendly society that is required to report under this reporting standard.
Transitional
A life company must report in accordance with this reporting standard for any reporting period ending on or after 1 January 2008. However, a life company must also report to APRA in accordance with the Prudential Rules which applied before the commencement of this reporting standard in respect of any reporting period ending before 1 January 2008.
Note: as an additional transitional measure, a life company must also report to APRA in accordance with Reporting Standard LRS 901 Transitional Arrangements 2008.
Interpretation
In this reporting standard:
business days means ordinary business days, exclusive of Saturdays, Sundays or public holidays;
principal executive officer means the principal executive officer of the life company for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the entity;
reporting period means a reporting period under paragraph 6 or, if applicable, paragraph 7.
Reporting Form LRF 420.0
Assets Backing Policy Liabilities
Instruction Guide
Introduction
Form LRF 420.0 Assets Backing Policy Liabilities (LRF 420.0) provides APRA with the necessary product-level balance sheet information to undertake an assessment of a life insurance company’s asset/liability mismatch risks for different product groups, and to enable APRA to produce relevant market statistics.
This Instruction Guide is designed to assist reporting entities in the completion of LRF 420.0. The Instruction Guide provides:
·general directions and notes regarding preparation and lodgement; and
·instructions relating to specific items.
General directions and notes
Reporting levels
LRF 420.0 must be completed by life companies other than friendly societies (and they are referred to herein as ‘Life Insurers’).
The form is to be completed separately for each statutory fund.
LRF 420.0 contains two sections:
1.All Statutory Fund Products; and
2.Totals by Class of Business.
Within Section 1, reporting items are to be completed for each APRA product group (as defined below).
Unit of measurement
LRF 420.0 is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates.
Definitions
Definitions for data reporting items required by this form have been provided where appropriate in the instructions under the section headed ‘Instructions for specific items’. Also see Instructions to Forms LRF 300.1 Statement of Financial Position (SF and SF Eliminations) (LRF 300.1) and LRF 300.2 Statement of Financial Position (SF Total, SHF, SH Elim, Entity) (LRF 300.2) for additional explanation of particular items where reference is made.
Reporting period
Life Insurers are required to report the information in the reporting form on an annual basis, with respect to the financial year of the Life Insurer.
Basis of preparation
In completing this form, unless specifically stated otherwise, Life Insurers are to follow the basis that is used for the preparation of the annual financial statements in accordance with the Australian accounting standards, specifically in regard to the:
·interpretation/definition of specific asset items; and
·appropriate measurement basis for asset items.
All assets are to be reported in this form at Fair Value.
Actuarial valuations and calculations included in, or used in the preparation of, the form must be in accordance with prudential standards.
If additional clarification is required for specific asset items in this form, reference should be made to the section ‘Instructions for specific items’, which is provided as a guide.’
The values of assets reported in each asset class in this form are to be consistent with the effective positions shown in LRF 300.1; i.e. after the look-through and hedging adjustments to individual asset categories. An exception to this applies for assets with non-standard resilience requirements, as outlined below.
For the purposes of reporting under this form, contracts are to be classified in accordance with Prudential Standard LPS 350 Contract Classification for the Purpose of Regulatory Reporting to APRA (LPS 350).
APRA product group
For consistency of reporting across the range of forms applicable to life insurers, APRA adopts a single set of product groupings for life insurers. The following table contains a list of APRA product groups applicable to life companies other than friendly societies.
| Ref. | Product Group | Notes | Category |
| Life companies other than friendly societies | |||
| L1 | Conventional Participating (Par) | Includes Whole of Life policies and Endowment policies | Par |
| L2 | Participating Investment Account | As defined in section 14 of the Life Insurance Act 1995. Exclude non-participating investment account policies (refer L8, below) | Par |
| L3 | Annuity with Longevity Risk | Annuities providing periodic payments that are dependent on the continuance of human life | Non-par |
| L4 | Individual Lump Sum Risk | Lump sum risk policies issued on an individual (retail) basis. Includes non-participating conventional policies | Non-par |
| L5 | Individual Disability Income Insurance | Disability Income Insurance policies issued to individuals | Non-par |
| L6 | Group Lump Sum Risk | Lump sum risk policies issued on a group (wholesale) basis | Non-par |
| L7 | Group Disability Income Insurance | Disability Income Insurance policies issued on a group basis | Non-par |
| L8 | Non-par Investment Policy | Include non-participating investment account and investment linked policies | Non-par |
| L9 | Annuity without Longevity Risk | Annuities providing periodic payments that are NOT dependent on the continuance of human life | Non-par |
| L10 | Other | Include all other products not specifically categorised above – obtain APRA’s agreement to use | (Either can be reported) |
Rather than requiring a Related Product Group (as defined in APRA and other prudential standards) of a Life Insurer’s business to be allocated across APRA product groups, APRA will permit it to be contained wholly within one APRA Product Group.
Instructions for specific items
Also see Instructions to LRF 300.1 and LRF 300.2 for additional explanation of particular items where reference is made.
Section 1 All Statutory Fund Products
This section is to be completed for each class of business, as specified in the drop-down box list:
·Australia – Superannuation
·Australia – Ordinary
·Overseas – All business
The expressions ‘ordinary business’ and ‘superannuation business’ are defined in the Life Insurance Act 1995.
Column 1. Cash
This item is as per Item 1 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 2. Investment Property
This item is as per Item 2 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging). Note that the look through adjustment results in the inclusion of owner-occupied property.
Column 3. Equities
This item is as per Item 3 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 4. Non-indexed IBS
This item is as per Item 4 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 5. Indexed IBS
This item is as per Item 5 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 6. Loans
This item is as per Item 7 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 7. Other investment assets
This item is as per Item 9 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 8. Receivables
This item is as per Item 10 in Instructions to LRF 300.1 and LRF 300.2.
Column 9. Gross policy liabilities ceded under reinsurance
This item is as per Items 11.2 and 11.5 in Instructions to LRF 300.1 and LRF 300.2.
Column 10. Deferred tax assets
This item is as per Item 11.3 in Instructions to LRF 300.1 and LRF 300.2.
Column 11. Other non-investment assets
This item is as per Items 11.4 and 11.6 in Instructions to LRF 300.1 and LRF 300.2.
Column 12. Assets with non-standard resilience factors
This item is as per Items 4.1.12 in the Instruction Guides for Forms LRF 100.0 Solvency, LRF 110.0 Capital Adequacy and LRF 120.0 Management Capital.
Column 13. Assets with no resilience requirement
This is for assets that are admissible but do not have resilience requirements.
Column 14. Total assets attributable to product groups
The number entered should equal the sum of columns 1 to 13.
Columns 15 to 17 are for reporting liability items that relate specifically to the subset of assets which support the policy liabilities.
Column 15. Effective borrowings on a look-through basis
This item is as per Item 13 in Instructions to LRF 300.1 and LRF 300.2 (as adjusted for look-through and hedging).
Column 16. Tax Liabilities
This item is as per Items 15.1 and 15.2 in Instructions to LRF 300.1 and LRF 300.2.
Column 17. Other Liabilities, apart from borrowings and tax liabilities
This represents any other liabilities, excluding borrowings and tax liabilities.
Column 18. Total liabilities attributable to product groups [derived item]
This is the sum of columns 15 to 17.
Column 19. Net total of assets backing policy liabilities [derived item]
This is derived by netting column 14 and column 18. The result must equal total Gross Policy Liabilities for each Product Group (since the value of outwards reinsurance is included as one of the assets that back policy liabilities).
Borrowings are included as one of the categories above, to cater for the situation where investment assets exceed total policy liabilities and the asset classes are effectively ‘geared’. Tax assets are also catered for where appropriate.
Column 20. Proportion (%) exposed to foreign currencies
This represents the proportion (as a percentage) of the total assets in Item 19 that are exposed to unhedged currency risks associated with currencies other than AUD.
Section 2 Totals by Class of Business
No values are required to be entered in this section. Items in this section are derived fields that sum up the assets backing policy liabilities by class of business and asset class.
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