Financial Sector (Collection of Data) (reporting standard) determination No. 4 of 2010 GRS 140 (2010) Investments (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 4 of 2010
Reporting Standard GRS 140 (2010) Investments
Financial Sector (Collection of Data) Act 2001
I, Ian Laughlin, a delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:
REVOKE each of the following Reporting Standards which is in force as at the date of this determination (the old standards):
a) Reporting Standard GRS 140.0 (2008) Investments – Direct Interest Rate Holdings and Risk Charge;
b)Reporting Standard GRS 140.1 (2008) Investments – Direct Equity Holdings and Risk Charge;
c)Reporting Standard GRS 140.2 (2008) Investments – Direct Property Holdings and Risk Charge;
d)Reporting Standard GRS 140.3 (2008) Investments – Loans and Advances and Risk Charge;
e)Reporting Standard GRS 140.4 (2008) Investments – Assets Indirectly Held by Insurer and Risk Charge; and
DETERMINE Reporting Standard GRS 140 (2010) Investments in the form set out in the Schedule (the new standard), which applies to the financial sector entities referred to in paragraph 2 of the new standard.
Under section 15 of the Act, I DECLARE that the new standard shall begin to apply, and the old standards shall cease to apply, on the date of registration of this instrument on the Federal Register of Legislative Instruments.
Dated 17 August 2010
[Signed]
Ian Laughlin
Member
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.
Schedule
Reporting Standard GRS 140 (2010) Investments comprises the 97 pages commencing on the next page.
Reporting Standard GRS 140 (2010)
Investments
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 operating in Australia through branch operations (foreign insurers), to report to APRA, generally on a quarterly and annual basis, the composition of their investments.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
Form GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge (Form GRF 140.0) and the instructions to that form (which are attached and form part of this reporting standard);
Form GRF 140.1 Investments – Direct Equity Holdings and Risk Charge (Form GRF 140.1) and the instructions to that form (which are attached and form part of this reporting standard);
Form GRF 140.2 Investments – Direct Property Holdings and Risk Charge (GRF 140.2) and the instructions to that form (which are attached and form part of this reporting standard);
Form GRF 140.3 Investments – Loans and Advances and Risk Charge (Form GRF 140.3) and the instructions to that form (which are attached and form part of this reporting standard);
Form GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge (Form GRF 140.4) and the instructions to that form (which are attached and form part of this reporting standard); and
any prudential standards referenced in the attached instructions.
Purpose
Data collected in Forms GRF 140.0, GRF 140.1, GRF 140.2, GRF 140.3 and GRF 140.4 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with the capital standards.[1]
[1] Reference to capital standards has the same meaning as in Prudential Standards GPS 001 Definitions, where the capital standards refer collectively to prudential standards relating to capital adequacy.
Application and commencement
This reporting standard applies to all insurers for reporting periods ending on or after the date of registration of the reporting standard on the Federal Register of Legislative Instruments.
Information required
An insurer must provide APRA with the information required by Forms GRF 140.0, GRF 140.1, GRF 140.2, GRF 140.3 and 140.4 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 the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or
(b)by manually completing Forms GRF 140.0 , GRF 140.1, GRF 140.2, GRF 140.3 and GRF 140.4 on paper and mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales.
Where the information is submitted by means of an agent to whom the insurer has outsourced the function of providing the information on the insurer’s behalf, the agent may only provide the information in accordance with subparagraph 4(b) if the agent has contacted APRA and advised that the agent cannot submit the information in electronic form under subparagraph 4(a).
Note: the Direct to APRA application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 6, 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 paragraph 3 read with subparagraph 5(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 contain statements of the auditor’s opinions on the matters required by the prudential standards to be dealt with in the certificate..
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 5(a) or (b)).
The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:
(a)in the case of the quarterly information required by subparagraph 5(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 5(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 in relation to the annual information required by paragraph 3 read with subparagraph 5(b) must be provided to APRA by the time specified in subparagraph 7(b) of this reporting standard (unless an extension is granted under paragraph 8).
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 specified in the notice of extension.
Quality control
The information provided by an insurer under this reporting standard 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 the officer of an insurer provides the information required by this reporting standard:
(a)under subparagraph 4(a), the officer must digitally sign, authorise and encrypt the information (for which purpose APRA’s certificate authority will issue digital certificates, for use with the ‘Direct to APRA’ application, to officers of the insurer who have authority from the insurer to transmit data to APRA); or
(b)under subparagraph 4(b), the completed forms must be signed in accordance with paragraph 13.
If an insurer provides the information required by this reporting standard through an agent under either subparagraph 4(a) or (b), the agent will not be required to sign or authorise the information. However, the insurer must:
(a)obtain from the agent a paper copy of the completed forms as provided to APRA (under either subparagraph 4(a) or (b)); and
(b)cause the paper copies to be signed in accordance with paragraph 13; and
(c)lodge the signed paper copies with APRA by mailing the completed forms to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales, by the relevant due date (unless APRA, in writing, waives the requirement in relation to the insurer to lodge the signed paper copies with APRA).
Note: APRA may, for example, decide to waive the requirement under subparagraph 12(c) where an insurer has undertaken to retain the signed copies of the completed forms for an agreed period of time.
If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed forms 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 the instructions to a form, to clarify their application to the form provided it does not involve changing any substantive requirement in the form or instructions.
If APRA makes such a variation it must notify insurers of this in writing.
Transition
An insurer must report in relation to a reporting period ending prior to 1 July 2010 in accordance with the reporting standards that this reporting standard replaced.
Interpretation
In this reporting standard:
appointed auditor means an auditor appointed under paragraph 39(1)(a) of the Insurance Ac;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
capital standards means the prudential standards which relate to capital adequacy as defined in Prudential Standard GPS 001 Definitions;
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.
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.
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 5(a) or (b) or, if appropriate, paragraph 6.
A reference to a prudential standard means the prudential standard, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it.
Reporting Form GRF 140.0
Investments – Direct Interest Rate Holdings and Risk Charge
Instruction Guide
Introduction
This instruction guide is designed to assist in the completion of GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge.
Information on this form will be used by APRA to obtain an investment profile of the reporting insurer and to calculate in part the Investment Risk Capital Charge. Specific information in these forms will also be used by the Australian Bureau of Statistics (ABS) for statistical purposes.
For the purposes of completing the respective investment forms, only include investments that are included in the aggregate balance disclosed for the asset item 3 titled ‘Investments (related to GRF 140 series of forms)’ on GRF 300.0 Statement of Financial Position. Do not include in these investment forms asset items reported in any of the other asset categories in GRF 300.0 Statement of Financial Position (e.g. ‘Other investments’). Otherwise the asset items will be subject to two investment risk charges, one in GRF 300.0 Statement of Financial Position and another in the respective investment forms.
Investment risk charge
The investment risk charge applicable for an insurer’s (and reinsurer’s) on-balance sheet Investment/Asset exposures is calculated in accordance with Prudential Standard GPS 114 Capital Adequacy: Investment Risk Capital Charge (GPS 114). The form categorises assets into investment capital factor groupings to calculate the applicable investment risk capital charge for each asset category. The aggregate investment risk charge calculated is included in the calculation of the insurer’s minimum capital requirement.
The fair value of each applicable asset/asset category is required to be disclosed into the appropriate cell for each column titled ‘Fair Value’.
Values in column titled ‘Investment Risk Charge’ are calculated based on the fair value of assets disclosed.
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Standards Board Guidance Statement issued by the Auditing and Assurance Standards Board.
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 (the Act). This means that:
the completed form for the financial year must be audited by the Appointed 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 entity
This form is to be completed by:
Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.
Unit of measurement
GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge 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’ (AASB 121).
The general requirements of AASB 121 for translation are:
Foreign currency monetary items[2] outstanding at the reporting date must be translated at the spot rate[3] at the reporting date.
[2] Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.
[3] Spot rate means the exchange rate for immediate delivery.
Foreign currency non-monetary items[4] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
[4]Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.
Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
·Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
Translation of financial reports should otherwise follow the requirements in AASB 121.
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.
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 Reporting Standard GRS 140.0 Investments – Direct Interest Rate Holdings and Risk Charge.
Basis of preparation
In completing this form unless otherwise specifically stated below, it is recommended that general insurers follow the Australian accounting standards where possible, regarding the interpretation, recognition and measurement of investments notably AASB 1023 ‘General Insurance Contracts’ (AASB 1023).
The aggregate value of investments disclosed in the forms listed below must agree to the amount reported in items 3 of GRF 300.0 Statement of Financial Position.
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 – Indirectly Held by the Insurer and Risk Charge
APRA applies the fair value approach to measurement of assets backing general insurance liabilities for its regulatory reporting which is consistent with the classification basis in AASB 1023 and the present value measurement approach for general insurance liabilities. The value of the investments reported in this form (and all the above forms) should be equal to the value of investments deemed to be assets backing insurance liabilities for statutory reporting purposes.
Investments reported in this form (and other forms listed above) that back the entity's general insurance liabilities must be measured at fair value. These investments must not be valued at cost. Fair value has the same meaning as defined in AASB 139, that is, 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 (i.e. bid or ask price) in an active and liquid market; or
When there is infrequent activity in a market, and 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs.6
6See AASB 139 ‘Financial Instruments: Recognition and Measurement’.
Derivative instruments that are used to hedge investments (other than for listed equity investments) that are included in the above forms are not to be reported in these forms, they are to be reported in GRF 160.0 Derivatives Activity and Risk Charge.
For investments reported in this form, changes in the values at which such investments are measured must be recognised as revenues (or losses) in 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 Standard AASB 116 ‘Property, Plant and Equipment’ does not apply to such investments.
Investment Capital Factor %
This column for each form discloses the appropriate investment capital factor for the asset type in accordance with GPS 114.
Investment Risk Charge
This column for each form will calculate the appropriate investment risk charge in accordance with GPS 114.
Holding of Units in Unit Trusts
Where the insurer’s investments are represented by holdings of units in unlisted or listed managed investment vehicles/entities, the following reporting is required:
Units are to be reported in GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge. This form requires amongst other things, disclosure of the value of the unit holding according to the nature of the underlying market exposure (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosed in accordance with the fund’s advised asset allocation; and
Holding must be disclosed as unlisted or listed units.
Exception
If the units are held in a related entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GPS 114. Once approved by APRA this will allow the insurer to look through the legal structures involved and consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.
Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing
Treatment is to be consistent with AASB 139.
Where the transferee of the security effectively receives a lender’s rate of return, or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities are not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.
Under this method of accounting, for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.
Securities Transacted not Settled (i.e. trade date accounting)
For the purpose of the APRA forms, include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge.
Subordinated Debt
Subordinated debt has the same meaning as in GPS 114. Subordinated debt is any debt instrument issued by a company (whether Australian or foreign) that constitutes debt subordination within the meaning of subsection 563C(2) of the Corporations Act 2001 but with the references in the subjection to “Company” to be read as including foreign corporations. This definition does not apply to debt instruments issued by an SPV set up for the purpose of securitising an asset or a pool of assets. Any debt instruments issued by such an SPV are to be treated as ordinary debt instruments with the investment risk capital charge applied according to the issue-specific counterparty rating.
Investments in subordinated debt instruments are to be reported either in GRF 140.1 Investments – Direct Equity holdings and Risk Charges or GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge. Under GPS 114 the investment risk charge of subordinated debt instruments are lower compared to other equities instruments.
Related parties
Where this term is used or referenced in these forms, related parties is to be interpreted consistently with its definition and meaning as contained in AASB 124 ‘Related Party Disclosures’ (AASB 124).
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(a)controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
(b)has significant influence over the entity or has joint control over the entity; or
(c)is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or
(d)is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or
(e)is a member of the key management personnel of the entity or its parent; or
(f)is a close member of the family of any individual referred to in (a), (b) or (e); or
(g)is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
(h)is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
Specific instructions
Scope
Do not include loans and advances in this section. These are to be included in the form headed “Loans and Advances”.
Specific disclosure of deposit and security holdings classified into short term and long term securities is required by the ABS.
Definitions/interpretation for specific items
Deposits or placements with (ie money market type deposits / placements)
These primarily include deposits or placements that are of a money market type basis. These may be available on demand (11am accounts, money market or 24-hour money), and must be held as part of the Insurer’s investments portfolio.
Do not include any deposits at call that are used by the Insurer for daily liquidity/operations (i.e. funds that are not specifically included as investment funds). These are to be disclosed as Money at short call in Item 1.2 on GRF 300.0 Statement of Financial Position.
This information is primarily required by the ABS.
1.1Authorised Deposit Taking Institutions (ADIs)
Includes funds lodged with Banks, Credit Unions, Building Societies and other ADIs as defined below.
1.2Other
Include placements and money market accounts held with entities other than those included in the above classification.
Short term securities
The term short term refers to holding of securities with an original term to maturity (as opposed to residual term to maturity), that is equal to or less than 1 year.
Include:
Bills of Exchange, bank-accepted and other;
Certificates of deposits;
Commercial paper;
Other one name paper; and
Securities lent or sold under repurchase agreements.
Bills of Exchange
2.1Bank Accepted
Report bills of exchange that are accepted by a Bank.
2.2Other
Report all other bills of exchange other than bank accepted bills.
Commercial paper and promissory notes issued by:
The following provides guidelines to facilitate in the disclosure for this return of the counterparty/issuer of interest rate securities held by the insurer. The following specific disclosures are required by the ABS.
2.3Banks and ADIs
Banks refers to ADIs, in relation to which an authority under subsection 9(3) is in force and which hold a consent under section 66 of the Banking Act 1959 (Banking Act) to use the word bank.
Include:
Development banks; and
Foreign banks licensed to operate in Australia under the Banking Act.
Exclude:
Merchant banks (record as ‘Other’).
ADIs refer to corporations, which have an authority under subsection 9(3) in force, but which do not hold consent under section 66 under the Banking Act to use the word bank. These include Building Societies and Credit Unions.
Exclude:
Holding of securities issued by Finance Corporations, these are included under Registered Financial Corporations.
2.4General insurance corporations
Includes corporations that provide general insurance (e.g. fire, accident, employer liability, public liability, houseowner/householders, marine).
2.5Securitisers
These are financial vehicles that issue short and/or long-term securities (called asset-backed securities) using specifically selected assets (e.g. mortgages, receivables). They provide backing (collateral) for the securities and generate the payment streams necessary to fulfil interest and principal requirements for investors. Include holdings of the following:
Mortgage backed securities; and
Other asset backed securities (other than mortgage backed).
2.6Private trading corporations
Include intra group financiers and retailers registered under the Financial Sector (Collection of Data) Act 2001 (Collection of Data Act) and parent companies with significant holdings of shares in private trading companies.
2.7Registered Financial corporations
Registered Financial Corporations refers to corporations registered under the Collection of Data Act that are classified as Categories D or Other. A list of corporations registered under the Collection of Data Act and their classification are available on the APRA website.
Include:
Money market corporations (D); and
Other (formerly categories E, F and G).
Exclude:
Intra group financiers and retailers registered under the Collection of Data Act; and
Cash management trusts (Note: for the purpose of applying the required investment capital charge, cash management trusts are to be reported in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge).
2.8Australian Commonwealth Government Corporations
Trading enterprises owned by the Commonwealth are those businesses, which are owned and controlled by the Australian Commonwealth Government.
Include:
All resident trading enterprises owned 50% or more by the Commonwealth Government or controlled by the Commonwealth Government through legislation, decree or regulation
2.9Australian Commonwealth Government
Include:
Treasury notes
Exclude:
Treasury bonds (include these in long term securities);
Government trading enterprises (record as Australian Commonwealth Government corporations);
Departments of the ACT and Northern Territory Governments (record as Other Australian Government (State, territory and local government); and
Reserve Bank of Australia and Commonwealth Government financial institutions such as AIDC and EFIC (record as Australian Commonwealth Government Corporations).
2.10Other Australian Government (state, territory and local government)
State, territory and local governments provide non-market goods and services, principally financed by taxes, to regulate economic activity, maintain law and order and to redistribute income and wealth by means of transfers and hence provided free of charge or at nominal prices well below the cost of production.
2.11National government of a foreign country:
where the security has a Grade 1 rating or the country's long term foreign currency rating is Grade 1.
This is required by APRA to enable the calculation of the required investment risk charge.
Refer to GPS 114 for further information on classification of rating grades.
Other
Disclose all other investments in securities issued by the national government of a foreign country which are not reported in (i) above.
2.12Other
Include securities issued by counterparties other than those specifically listed on the form.
Long term debt securities
The term long term refers to holding of securities which have an original term to maturity (as opposed to residual term to maturity), that is greater than 1 year.
Include:
Commercial paper;
Other one name paper; and
Securities lent or sold under repurchase agreements.
Long term debt Securities issued by:
The following provides guidelines to facilitate in the disclosure for this return of the counterparty/issuer of interest rate securities held by the insurer. The following specific disclosures are required by the ABS.
3.1Banks and Authorised Deposit Taking Institutions (ADIs)
Banks refers to ADIs, in relation to which an authority under subsection 9(3) is in force and which hold consent under section 66 of the Banking Act to use the word bank.
Include:
Development banks; and
Foreign banks licensed to operate in Australia under the Banking Act.
Exclude:
Merchant banks (record as ‘Other’).
ADIs refer to corporations, which have an authority under subsection 9(3) in force, but which do not hold consent under section 66 under the Banking Act to use the word bank. These include Building Societies and Credit unions.
Exclude:
Holding of securities issued by Finance Corporations, these are included under Registered Financial Corporations.
3.2General insurance corporations
Includes corporations that provide general insurance (e.g. fire, accident, employer liability, public liability, household, marine).
3.3Securitisers
These are financial vehicles that issue short and/or long-term securities (called asset-backed securities) using specifically selected assets (e.g. mortgages, receivables). They provide backing (collateral) for the securities and generate the payment streams necessary to fulfil interest and principal requirements for investors. Include holdings of the following:
Mortgage backed securities; and
Other asset backed securities (other than mortgage backed).
3.4Private trading corporations
Include Intra group financiers and retailers registered under the Collection of Data Act and parent companies with significant holdings of shares in private trading companies.
3.5Registered Financial corporations
Registered Financial Corporations refers to corporations registered under the Collection of Data Act that are classified as Categories D or Other. A list of corporations registered under the Collection of Data Act and their classification are available on the APRA website.
Include:
Money market corporations (D); and
Other (formerly categories E, F and G).
Exclude:
Intra group financiers and retailers registered under Collection of Data Act.
Cash management trusts (Note: for the purpose of applying the required investment capital charge, cash management trusts are to be reported in the ‘Assets Indirectly Held’ investment form).
3.6Australian Commonwealth Government corporations
Trading enterprises owned by the Commonwealth are those businesses, which are owned and controlled by the Australian Commonwealth Government.
Include:
All resident trading enterprises owned 50% or more by the Commonwealth Government or controlled by the Commonwealth Government through legislation, decree or regulation.
3.7Australian Commonwealth Government
Exclude:
Treasury Notes (record as short term securities);
Government trading enterprises (record as Australian Commonwealth Government corporations);
Departments of the ACT and Northern Territory Governments (record as Other Australian Government (State, territory and local government); and
Reserve Bank of Australia and Commonwealth Government financial institutions such as AIDC and EFIC (record as Australian Commonwealth Government Corporations).
3.8Other Australian Government (state, territory and local government)
State, territory and local general government provide non-market goods and services, principally financed by taxes, to regulate economic activity, maintain law and order and to redistribute income and wealth by means of transfers and hence goods and services are provided free of charge or at nominal prices well below the cost of production.
3.9National government of a foreign country:
where the security has a Grade 1 rating or the country’s long term foreign currency rating is Grade 1
Disclose the investments in securities issued by the national government of a foreign country with a rating of Grade 1.
Refer to GPS 114 for further information on classification of rating grades.
Other
Disclose all other investments in securities issued by the national government of a foreign country which are not reported in (i) above.
3.10Other
Include securities issued by counterparties other than those specifically listed on the form.
Total direct interest rate investments
This item is calculated automatically by the form. It represents the sum of the items 1.1 to 3.10 as listed above.
of which: Investments denominated in a currency other than the Australian currency
Disclose the aggregate balance of interest rate investments that are denominated in a currency other than the Australian currency.
Total direct interest rate investments classified into the following (excluding government issued securities that are risk weighted above):
4.1Debt obligations with a Rating Grade of 1 that matures or is redeemable:
in less than 1 year
in 1 year or more
Refer to GPS 114 for further information on classification of rating grades.
4.2Debt obligations with a Rating Grade of 2 that matures or is redeemable:
in less than 1 year
in 1 year or more
Refer to GPS 114 for further information on classification of rating grades.
4.3Debt obligations with a Rating Grade of 3
Refer to GPS 114 for further information on classification of rating grades.
4.4Debt obligations with a Rating Grade of 4 or are unrated
Refer to GPS 114 for further information on classification of rating grades.
4.5Debt obligations with a Rating Grade of 5
Refer to GPS 114 for further information on classification of rating grades.
Total direct Interest rate investments which represent the following:
5.1Policyholders’ funds
Policyholders funds is also referred to as ‘technical reserves/funds’. Use of the term does not imply ownership of these funds by policyholders, like under life insurance. The term is used particularly in establishing the investment management mandates to reflect the different cashflow/risk and return requirements from that of shareholders’ funds. Disclose the aggregate balance of direct interest rate investments that are designated by the Insurer as representing policyholders’ funds (where this is done by the insurer).
5.2Shareholders’ Funds
Where the insurer has established the investment management mandates along these terms to reflect the different cashflow/risk and return requirements of shareholders’ funds from policyholders’ funds/technical reserves, disclose the aggregate balance of direct interest rate investments designated as representing shareholders’ funds (where this is done by the insurer).
Total direct Interest rate investments classified into the following:
Deposits/placements with, or debt securities issued by (do not include loans and advances here):
6.1The reporting insurer (i.e. holdings in own debt securities)
Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose holdings of debt securities issued by the licensed insurer that are held by the licensed insurer.
6.2Parent entity
Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities that are issued by the parent entity of the licensed insurer.
6.2.1.Controlled entities/Controlled entities of the parent entity
For branches, the line item 6.2.1 ‘Controlled entities/Controlled entities of the parent entity’ is to be interpreted as amounts in relation to ‘Controlled entities of the parent entity’, and for licensed insurance entities amounts are in relation to ‘Controlled entities’ of the reporting insurer.
Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities that are issued by controlled entities of the licensed reporting insurer.
6.3Associates/Joint Ventures
Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities that are issued by Associates or Joint Ventures of the licensed insurer. Associates and Joint Ventures are defined in accordance with AASB 131 ‘Interests in Joint Ventures’ and AASB 128 ‘Investment in Associates’.
6.4Other related parties
Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities held by the licensed insurer that are issued by any other related entity of the licensed insurer that is not specifically identified above.
Total investment risk charge
The total investment risk charge for direct interest rate holdings is automatically calculated.
Reporting Form GRF 140.1
Investments – Direct Equity Holdings and Risk Charge
Instruction Guide
Introduction
This instruction guide is designed to assist in the completion of GRF 140.1 Investments – Direct Equity Holdings and Risk Charge.
Information on this form will be used by APRA to obtain an investment profile of the reporting insurer and to calculate in part the prudential Investment Risk Capital Charge. Specific information in these forms will also be used by the Australian Bureau of Statistics (ABS) for statistical purposes.
For the purposes of completing the respective investment forms, only include investments that are included in the aggregate balance disclosed for the asset item titled “Investments (related to GRF 140 series of forms)” on GRF 300.0 Statement of Financial Position. Do not include in these forms asset items reported in any of the other asset categories in GRF 300.0 Statement of Financial Position (e.g. “Other investments”). Otherwise the asset items will be subject to two investment risk charges, one in GRF 300.0 Statement of Financial Position and another in the respective investment forms.
Investment Risk Charge
The investment risk charge applicable for an insurer’s (and reinsurer’s) on-balance sheet Investment/Asset exposures is calculated in accordance with Prudential Standard GPS 114 Capital Adequacy: Investment Risk Capital Charge (GPS 114). The form categorises assets into investment capital factor groupings to calculate the applicable investment risk capital charge for each asset category. The aggregate investment risk charge calculated is included in the calculation of the insurer’s minimum capital requirement.
The fair value of each applicable asset/asset category is required to be disclosed into the appropriate cell for each column titled ‘Fair Value’.
Values in column titled ‘Investment Risk Charge’ are calculated based on the fair value of assets disclosed.
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Standards Board Guidance Statement issued by the Auditing and Assurance Standards Board.
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 (the Act). This means that:
the completed form for the financial year must be audited by the Appointed 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 entity
This form is to be completed by:
Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.
Unit of measurement
GRF 140.1 Investments – Direct Equity Holdings and Risk Charge 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’ (AASB 121).
The general requirements of AASB 121 for translation are:
Foreign currency monetary items[5] outstanding at the reporting date must be translated at the spot rate[6] at the reporting date.
[5] Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.
[6] Spot rate means the exchange rate for immediate delivery.
Foreign currency non-monetary items[7] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
[7] Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.
Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
·Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
·Translation of financial reports should otherwise follow the requirements in AASB 121.
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.
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 Reporting Standard GRS 140.1 Investments – Direct Equity Holdings and Risk Charge.
Basis of preparation
In completing this form unless otherwise specifically stated below, it is recommended that general insurers follow the Australian accounting standards where possible, regarding the interpretation, recognition and measurement of investments notably AASB 1023 ‘General Insurance Contracts’ (AASB 1023).
The aggregate value of investments disclosed in the forms listed below must agree to the amount in item 3 of GRF 300.0 Statement of Financial Position.
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 – Indirectly Held by the Insurer and Risk Charge
APRA applies the notion of assets backing general insurance liabilities for its regulatory reporting which is consistent with the classification basis in AASB 1023. The value of the investments reported in this form (and all the above forms) should be equal to the value of investments deemed to be assets backing insurance liabilities for statutory reporting purposes.
Investments reported in this form (and other forms listed above) that back the entity's general insurance liabilities must be measured at fair value. These investments must not be valued at cost. Fair value has the same meaning as defined in AASB 139, that is, 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 (i.e. bid or ask price) in an active and liquid market; or
When there is infrequent activity in a market, and 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs6.
6 See AASB 139 ‘Financial Instruments: Recognition and Measurement’.
Derivative instruments that are used to hedge investments (other than for listed equity investments) that are included in the above forms are not to be reported in these forms, they are to be reported in GRF 160.0 Derivatives Activity and Risk Charge.
Derivatives are generally defined as those instruments or contracts, where the value is based on other products, either financial or real, and/or on prices associated with financial products.
Derivative contracts involve:
Future delivery, receipt or exchange of financial items such as cash or another derivative instrument, or
Future exchange of real assets for financial items where the contract may be tradeable and has a market value.
The contracts can either be binding on both parties (e.g. as with a currency swap) or subject to the exercise by one party of a right contained in the contract (as with options).
Where the insurer holds derivatives over listed equities, the investment risk capital charge applicable to all holdings of listed equities under paragraph 10 of GPS 114 is replaced with the equity market risk component. The equity market risk component is equal to 16 per cent of the absolute value of the net exposure to listed equities and derivatives over listed equities (where the derivatives exposure for options is calculated on a delta-weighted basis).
The equity basis risk component applies only to derivatives over listed equities for which the notional equity position is negative and will be a specified percentage of the absolute value of the notional equity position. The percentage is the lesser of eight per cent and 16 x (100 per cent – overlap percentage). The overlap percentage measures the effectiveness of the hedge between the derivative and the physical portfolio it is being used to hedge and is equal to the sum of the lesser of A and B for each stock in that portfolio where:
(a) A is the stock’s proportionate weight in that portfolio; and
(b) B is the stock’s proportionate weight in the index on which the derivative is based.
A derivative that is not being used to hedge a portfolio will have a basis risk percentage of eight per cent. A portfolio may consist of one or more stocks.
The equity market risk component and the equity basis risk components are to be calculated under GRF 140.1 Investments – Direct Equity Holdings and Risk Charge, regardless of whether they are held directly or indirectly (where the insurer has elected to apply the look-through basis for indirectly held listed equities). The counterparty risk component relating to derivatives are required to be calculated using GRF 160.0 Derivative Activity and Risk Charges.
For investments reported in this form, changes in the values at which such investments are measured must be recognised as revenues (or losses) in 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 Standard AASB 116 ‘Property, Plant and Equipment’ does not apply to such investments.
Holding of Units in Unit Trusts
Where the insurer’s investments are represented by holdings of units in unlisted or listed managed investment vehicles/entities, the following reporting is required:
Units are to be reported in GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge. This form requires amongst other things, disclosure of the value of the unit holding according to the nature of the underlying market exposure (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosure in accordance with the fund’s advised asset allocation.
Holding must be disclosed as unlisted or listed units.
Exception
If the units are held in a related/controlled entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GPS 114. Once approved by APRA this will allow the insurer to look through the legal structures involved and consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.
Look-through Basis
For assets of an insurer or its ELE held under a trust (other than a cash management trust), the insurer may apply the Investment Capital Factors applicable to the underlying assets (including derivatives) of the trust, if the insurer has information on the underlying assets.
Where the insurer has elected to apply the look-through basis to calculate the investment capital factors and the underlying assets of the trust includes listed equities; then the investment capital factors associated with the insurer’s share of the listed equities are to be calculated in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge.
APRA may require an insurer to apply different Investment Capital Factors to different components of a hybrid instrument (with both equity and debt features such as embedded derivatives).
Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing
Treatment is to be consistent with AASB 139.
Where the transferee of the security effectively receives a lender’s rate of return, or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.
Under this method of accounting for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.
Securities Transacted not Settled (i.e. trade date accounting)
For the purpose of the APRA forms, include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge.
Securities Listed on a Recognised Exchange
It will generally be appropriate to treat an exchange organisation as ‘recognised’ where it meets the following criteria:
·it is subject to authorisation, licensing or other means of recognition by a government or other competent authority;
·it has rules, issued or approved, by the government or other competent authority defining the conditions:
§ for the operation of the exchange;
§ for access to the exchange; and
§ that must be satisfied by a contract before it can be dealt on the exchange;
·it has a mechanism that provides clearing services for contracts dealt through the exchange;
·it functions regularly;
·the exchange has a prudent and frequent margining system where relevant;
·the exchange requires settlement on a particular day as applicable;
·members of the exchange are themselves subject to supervision by the exchange or a competent authority; and
·the operations of the exchange in turn are supervised by government or other competent authority.
Related parties
Where this term is used or referenced in these forms, Related Parties is to be interpreted consistently with its definition and meaning as contained in AASB 124 ‘Related Party Disclosures’ (AASB 124).
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(a)controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
(b)has significant influence over the entity or has joint control over the entity; or
(c)is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or
(d)is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or
(e)is a member of the key management personnel of the entity or its parent; or
(f)is a close member of the family of any individual referred to in (a), (b) or (e); or
(g)is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
(h)is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
Fair Value
Investments reported in this form that are integral to the entity's general insurance activities must be measured at fair value.
Investment Capital Factor %
This column for each form discloses the appropriate investment capital factor for the asset type in accordance with GPS 114.
Investment Risk Charge
This column for each form will calculate the appropriate investment risk charge in accordance with GPS 114.
Specific instructions
The following provides guidelines to facilitate in the specific disclosure of equity related investments held by the insurer.
Note:
Specific disclosure of equity security holdings classified in points 1 and 2 of this form are required by the ABS.
Units in listed or unlisted trusts (e.g. property trusts): For the purposes of calculating the appropriate investment risk charge, units in listed and unlisted trusts are to be included in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge.
Australian Listed Equity – Direct holdings
The information required to be reported under this section is different to the information required to be disclosed for item 4 ‘Total listed equities - Direct holdings’ of this form. This section is mainly collected for the purposes of Australian Bureau of Statistics (ABS) and as such the definitions of listed equities are slightly different for ABS purposes.
For ABS purposes, listed equities includes only those equities listed on the Australian Securities Exchange (ASX) and excludes certain stocks including equity investments in non-Australian resident companies listed on the ASX.
The information required under item 4 ‘Total listed equities - Direct holdings’ is for the purposes of calculating the investment risk charge on equity investments and as such the guidance on what is considered to be listed equities for the purposes of the prudential standards is outlined under item 4 of this form.
Report all equity securities listed on the ASX at fair value. This section relates only to equity securities that are listed on the ASX. Do not include in this section equity securities that are owned by the insurer and listed on recognised stock exchanges in other countries outside of Australia.
Include:
Preference shares;
Securities (stock) lent or sold under repurchase agreements; and
Equity securities that are listed on the Australian stock exchange.
Exclude:
Rights, options and warrants, include these as Financial Derivatives on GRF 160.0 Derivative Activity and Risk Charge;
Equity in non-Australian resident companies listed on the ASX. Report these assets as unlisted equity;
Securities borrowed or purchased under resale agreements; and
Equity securities that are listed on recognised stock exchanges in other countries outside of Australia.
1.1Banks and ADIs
Banks refers to Authorised Deposit Taking Institutions (ADIs), in relation to which an authority under subsection 9(3) is in force and which holds a consent under section 66 of the Banking Act 1959 (Banking Act) to use the word bank.
Include:
Development banks;
Foreign banks licensed to operate in Australia under the Banking Act.
Exclude:
Merchant banks (record as ‘Other’).
ADIs refer to corporations, which have an authority under subsection 9(3) in force, but which do not hold consent under section 66 under the Banking Act to use the word bank. These include Building Societies and Credit Unions.
Exclude:
Holding of securities issued by Finance Corporations, these are included under Registered Financial Corporations.
1.3General insurance corporations
Includes corporations that provide general insurance (e.g. fire, accident, employer liability, public liability, houseowners/householders, marine).
Private trading corporations 1.4
Private trading corporations are those owned by the private sector.
Include:
All Australian resident private corporate trading enterprises, and non-profit institutions; and
Intra group financiers and retailers registered under the Financial Sector (Collection of Data) Act 2001 (Collection of Data Act) and parent companies with significant holdings of shares in private trading companies.
Exclude:
Non-resident enterprises
1.5Commonwealth government corporations
Trading enterprises owned by the Commonwealth are those businesses, which are owned and controlled by the Australian Commonwealth Government.
Include:
All resident trading enterprises owned 50% or more by the Commonwealth Government or controlled by the Commonwealth Government through legislation, decree or regulation.
1.6Registered Financial Corporations
Registered Financial Corporations refers to corporations registered under the Collection of Data Act that are classified as Categories D or Other. A list of corporations registered under the Collection of Data Act and their classification are available on the APRA website.
Include:
Money market corporations (D); and
Other (formerly categories E, F and G).
Exclude:
Intra group financiers and retailers registered under the Collection of Data Act.
Cash management trusts (Note: but for the purposes of applying the required investment capital charge, cash management trusts are to be reported in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge).
Other1.7
Report equity securities that are not specifically included in the categories listed above.
Other Equity – Direct Holdings
The information required to be reported under this section is different to the information required to be disclosed for item 5 ‘Total unlisted equities - Direct holdings’ of this form. This section is mainly collected for the purposes of Australian Bureau of Statistics (ABS) and as such the definitions of listed and unlisted equities are slightly different for ABS purposes.
For ABS purposes, listed equities includes only those equities listed on the Australian ASX and excludes certain stocks including equity investments in non-Australian resident companies listed on the ASX.
The information required under item 5 ‘Total unlisted equities - Direct holdings’ is for the purposes of calculating the investment risk charge on equity investments and as such the guidance on what is considered to be listed equities for the purposes of the prudential standards is outlined under item 5 of this form.
Report equity securities at fair value.
Include:
Unlisted preference shares;
Equity in unlisted Australian resident companies;
Listed equity securities in non-Australian resident companies listed on the ASX;
Equity in unlisted non-Australian resident companies;
Equity securities of non-Australian resident companies listed on overseas stock exchanges; and
Securities lent or sold under repurchase agreements.
Exclude:
Rights, options and warrants, include these in GRF 160.0 Derivatives Activity and Risk Charge.
Securities borrowed or purchased under resale agreements.
Units in unlisted unit trusts. Report in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge.
2.1Banks and ADIs
Banks refers to ADIs, in relation to which an authority under subsection 9(3) is in force and which holds consent under section 66 of the Banking Act to use the word bank.
Include:
Development banks; and
Foreign banks licensed to operate in Australia under the Banking Act.
Exclude:
Merchant banks (record as ‘Other’).
ADIs refer to corporations, which have an authority under subsection 9(3) in force, but which do not hold consent under section 66 under the Banking Act to use the word bank. These include Building Societies and Credit Unions.
Exclude:
Holding of securities issued by Finance Corporations, these are included under Registered Financial Corporations.
2.2General insurance corporations
Includes corporations that provide general insurance (e.g. fire, accident, employer liability, public liability, householders, marine).
2.3Private trading corporations
Private trading corporations are those owned by the private sector.
Include:
All Australian resident private corporate trading enterprises, and non-profit institutions; and
Intra group financiers and retailers registered under the Collection of Data Act and parent companies with significant holdings of shares in private trading companies.
Exclude:
Non-resident enterprises
2.4Commonwealth government corporations
Trading enterprises owned by the Commonwealth are those businesses, which are owned and controlled by the Australian Commonwealth Government.
Include:
All resident trading enterprises owned 50% or more by the Commonwealth Government or controlled by the Commonwealth Government through legislation, decree or regulation.
2.5Registered Financial Corporations
Registered Financial Corporations refers to corporations registered under the Collection of Data Act that are classified as Categories D or Other. A list of corporations registered under the Collection of Data Act and their classification are available on the APRA Internet.
Include:
Money market corporations (D); and
Other (formerly categories E, F and G).
Exclude:
Intra group financiers and retailers registered under the Collection of Data Act; and
Cash management trusts (Note: for the purposes of applying the required investment capital charge, cash management trusts are to be reported in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge).
2.6Other
Report equity securities that are not specifically included in the categories listed above.
The following disclosures are required to be able to calculate the appropriate investment risk charge for the purposes of calculating the minimum capital requirement.
Total equity securities
This is automatically calculated by the form and represents the sum of fair value of all equity investments of the insurer.
Subordinated Debt – Direct Holdings
Subordinated debt has the same meaning as in GPS 114. Subordinated debt is any debt instrument issued by a company (whether Australian or foreign) that constitutes debt subordination within the meaning of subsection 563C(2) of the Corporations Act 2001 but with the references in the subsection to “Company” to be read as including foreign corporations. This definition does not apply to debt instruments issued by an SPV set up for the purpose of securitising an asset or a pool of assets. Any debt instruments issued by such an SPV are to be treated as ordinary debt instruments with the investment risk capital charge applied according to the issue-specific counterparty rating.
For the purposes of calculating the investment risk charge, under GPS 114 subordinated debt instruments are treated differently to other equities instruments. Report the fair value of subordinated debt securities that are held directly by the insurer in this section. Where subordinated debt instruments are indirectly held these are to be reported in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge.
3.1Listed subordinated debt
Report the amount of subordinated debt listed on a recognised exchange.
3.2 Unlisted subordinated debt
Report the amount of unlisted subordinated debt, including any amounts of subordinated debt not listed on a recognised exchange.
Total Listed Equities– Direct Holdings
The information required to be reported under item 1 ‘Australian listed equity - Direct holdings’ of this form is different to the information required to be disclosed under this section. Item 1 ‘Australian listed equity - Direct holdings’ is mainly collected for the purposes of Australian Bureau of Statistics (ABS) and as such the definitions of listed and unlisted equities are slightly different for ABS purposes.
For ABS purposes, listed equities includes only those equities listed on the Australian Stock Exchange (ASX) and excludes certain stocks including equity investments in non-Australian resident companies listed on the ASX.
The information required under this section is for the purposes of calculating the investment risk charge on equity investments and as such the guidance on what is considered to be listed equities for the purposes of the prudential standards is outlined below.
Report the fair value of equity securities that is listed on a recognised exchange and held directly by the insurer.
Listed equities include:
Preference shares;
Securities (stock) lent or sold under repurchase agreements.
Exclude:
Rights, options and warrants over listed equities include these as Financial Derivatives on GRF 160.0 Derivative Activity and Risk Charge but taken into account in calculating the derivative position.
Securities borrowed or purchased under resale agreements.
Subordinated Debt instruments. Such instruments are to be reported under item 3 ‘Subordinated debt - Direct holdings’ in this form.
Units in listed unit trusts. Where the insurer has elected not to apply the look-through basis for the unit trust then report the amount in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge. However, where the insurer elects to apply the look-through basis for the unit trust, then the amount is to be reported in item 4.1 ‘Total listed equities - Indirectly held - 'Look-through basis'’ of this form.
Note: in this section do not include units in listed or unlisted trusts (e.g. property trusts) as the investment capital charge calculated here is for equity investment securities only. For the purposes of determining the appropriate investment capital charge, units in trusts are to be included in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge.
4.1Total listed equities – Indirectly Held – ‘Look-through’ basis
Report the amount of listed equities that are indirectly held through a listed trust (e.g. listed property trust) and where the insurer has elected to apply the ‘look-through’ basis. This amount should correspond with item 7.8 ‘Listed Equity’ of GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge.
4.2Derivative Position
Insurers are required to calculate the derivative position over listed equities outside the reporting forms and enter the total exposure to listed equities via derivatives at this item. A short position is to be recorded as a positive amount and a long position as a negative amount. The calculation of the derivative position is required to be submitted to APRA as supplementary information for each reporting period in a format developed by the insurer.
4.3Absolute Value of the Net Exposures to Listed Equities (Equity Market Risk Component)
Where an insurer holds derivatives over listed equities, the Investment Risk Capital charge applicable to all holdings of listed equities under paragraph 10 of GPS 114 is to be replaced with the equity market risk component. The equity market risk component is equal to 16 per cent of the absolute value of the net exposure to listed equities and derivatives over listed equities (where the derivative exposure for options is calculated on a delta-weighted basis).
The form will automatically calculate the absolute value of the net exposures to listed equities (sum of (item 4 + item 4.1) less item 4.2).
4.4Absolute Value of Notional Equity Position of Derivatives (Basis Risk Component)
The equity basis risk component applies only to derivatives over listed equities for which there is a notional equity position that is negative, and this will be a specified percentage of the absolute value of the notional equity position. The percentage is the lesser of eight per cent and 16 x (100 per cent - overlap percentage). The overlap percentage measures the effectiveness of the hedge between the derivative and the physical portfolio it is being used to hedge and is equal to the sum of the lesser of A and B for each stock in that portfolio where:
·A is the stock’s proportionate weight in the portfolio; and
·B is the stock’s proportionate weight in the index on which the derivative is based.
Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.
Unit of measurement
GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge 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’ (AASB 121).
The general requirements of AASB 121 for translation are:
Foreign currency monetary items[14] outstanding at the reporting date must be translated at the spot rate[15] at the reporting date.
[14] Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.
[15] Spot rate means the exchange rate for immediate delivery.
Foreign currency non-monetary items[16] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
[16] Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.
Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
·Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
·Translation of financial reports should otherwise follow the requirements in AASB 121.
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 Reporting Standard GRS 140.4 Investments –Indirectly Held by Insurer and Risk Charge.
Basis of preparation
In completing this form unless otherwise specifically stated below, it is recommended that general insurers follow the Australian accounting standards where possible, regarding the interpretation, recognition and measurement of investments notably AASB 1023 ‘General Insurance Contracts’. (AASB 1023)
The aggregate value of investments disclosed in the forms listed below must agree to the amount reported in item 3 of GRF 300.0 Statement of Financial Position.
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 – Indirectly Held by the Insurer and Risk Charge
APRA applies the notion of assets backing general insurance liabilities for its regulatory reporting which is consistent with the classification basis in AASB 1023. The value of the investments reported in this form (and all the above forms) should be equal to the value of investments deemed to be assets backing insurance liabilities for statutory reporting purposes.
Investments reported in this form (and other forms listed above) that back the entity's general insurance liabilities must be measured at fair value. These investments must not be valued at cost. Fair value has the same meaning as defined in AASB 139, that is, 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 (i.e. bid or ask price) in an active and liquid market; or
When there is infrequent activity in a market, and 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 – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs6.
6 See AASB 139 ‘Financial Instruments: Recognition and Measurement’.
Derivative instruments that are used to hedge investments that are included in the above forms are not to be reported in these forms, they are to be reported in GRF 160.0 Derivatives Activity and Risk Charge except for derivatives used to hedge exposures in listed equities. Derivatives over listed equities are to be reported in GRF 140.1 Investments – Direct Equity holdings and Risk Charges.
For investments reported in this form, changes in the values at which such investments are measured must be recognised as revenues (or losses) in 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 Standard AASB 116 ‘Property, Plant and Equipment’ does not apply to such investments.
Investment Capital Factor %
This column for each form discloses the appropriate investment capital factor for the asset type in accordance with GPS 114.
Investment Risk Charge
This column for each form will calculate the appropriate investment risk charge in accordance with GPS 114.
Holding in indirect investment vehicles
Where the insurer’s investments are represented by holdings of units in unlisted or listed managed investment vehicles/entities, the following reporting is required:
Units are to be reported in this form. This form requires amongst other things, disclosure of the value of the unit holding according to the nature of the underlying market exposure (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosed in accordance with the fund’s advised asset allocation.
Holding must be disclosed as unlisted or listed units.
Exception
If the units are held in a related/controlled entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GPS 114. Once approved by APRA this will allow the insurer to look through the legal structures involved and consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.
Look-through Basis
For assets of an insurer or its ELE held under a trust (other than a cash management trust), the insurer may apply the investment capital factors applicable to the underlying assets (including derivatives) of the trust, if the insurer has information on the underlying assets.
Where the insurer has elected to apply the look-through basis to calculate the investment capital factors and the underlying assets of the trust includes listed equities; then the investment capital factors associated with the insurer’s share of the listed equities are to be calculated in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge.
APRA may require an insurer to apply different investment capital factors to different components of a hybrid instrument (with both equity and debt features such as embedded derivatives).
Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing
Treatment is to be consistent with AASB 139.
Where the transferee of the security effectively receives a lender’s rate of return, or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.
Under this method of accounting for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.
Securities Transacted not Settled (i.e. trade date accounting)
For the purposes of the APRA forms include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge.
Securities Listed on a Recognised Exchange
It will generally be appropriate to treat an exchange organisation as ‘recognised’ where it meets the following criteria:
it is subject to authorisation, licensing or other means of recognition by a government or other competent authority;
it has rules, issued or approved, by the government or other competent authority defining the conditions:
·for the operation of the exchange;
·for access to the exchange; and
·that must be satisfied by a contract before it can be dealt on the exchange;
it has a mechanism that provides clearing services for contracts dealt through the exchange;
it functions regularly;
the exchange has a prudent and frequent margining system where relevant;
the exchange requires settlement on a particular day as applicable;
members of the exchange are themselves subject to supervision by the exchange or a competent authority; and
the operations of the exchange in turn are supervised by government or other competent authority.
Subordinated Debt
Subordinated debt has the same meaning as in GPS 114. Subordinated debt is any debt instrument issued by a company (whether Australian or foreign) that constitutes debt subordination within the meaning of subsection 563C(2) of the Corporations Act 2001 but with the references in the subjection to “Company” to be read as including foreign corporations. This definition does not apply to debt instruments issued by an SPV set up for the purpose of securitising an asset or a pool of assets. Any debt instruments issued by such an SPV are to be treated as ordinary debt instruments with the investment risk capital charge applied according to the issue-specific counterparty rating.
For the purposes of calculating the investment risk charge, under GPS 114 subordinated debt instruments are treated differently to other equities instruments.
Related parties
Where this term is used or referenced in these forms, related parties is to be interpreted consistently with its definition and meaning as contained in AASB 124 ‘Related Party Disclosures’ (AASB 124).
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(q)controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
(r)has significant influence over the entity or has joint control over the entity; or
(s)is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or
(t)is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or
(u)is a member of the key management personnel of the entity or its parent; or
is a close member of the family of any individual referred to in (a), (b) or (e); or
(w)is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
Specific instructions
The following provides guidelines to facilitate the specific disclosure of information requested by this form for the reporting insurer.
Part 1.
Total holdings
This is the aggregate value of the closing value of holdings listed in this part.
In Part 1, list all investments of the reporting insurer in investment vehicles, which will include holdings in the following:
individually managed mandates;
units in wholesale trusts;
units in retail/public offer unit trusts;
managed investment schemes; and
cash management trusts.
Include holdings in listed and unlisted trusts and related entities of the reporting insurer.
Exception:
If the units are held in a related/controlled entity of the insurer (i.e. a dedicated investment management entity for the insurer), the insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GPS 114. Once approved by APRA this will allow the insurer to look through the legal structures involved and consolidate the balance sheet of the related entity with its own for the purposes of determining the investment risk capital charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.
Name and ABN
Use the full name of the investment vehicle as identified in the investment deed. Also disclose the Australian Business Number (ABN). Where there is no identifier associated with the investment vehicle leave this field blank.
Related Party
Disclose “yes” or “no” if the investment vehicle is a related party of the reporting insurer. For this purpose related party has the meaning as set out above.
Closing Value
Report the value of the holdings as at the end of the reporting date for each investment vehicle.
Part 2. Aggregate holdings in indirect investment vehicles classified into the following:
Where the reporting insurer has disclosed investments in Part 1 in the form, the aggregate holdings must be disclosed as required by this part.
Total Funds
Disclose the aggregate balance for each investment listed in Part 1.
Investment Capital Factor %
This column discloses the appropriate investment capital factor for the asset type in accordance with GPS 114.
Investment Risk Charge
This column will calculate the appropriate investment risk charge in accordance with GPS 114.
Row headings of Part 2:
Listed trusts (excluding CMT) – without ‘look-through’
Disclose the aggregate value of the holdings that constitute investments in listed trusts.
Note: Do not include holdings of cash management trusts. These are to be disclosed on this form under item 3 to 6 (see below).
Also do not include holdings in a trust where the insurer has chosen to apply the ‘look-through basis’. For the purposes of calculating the investment risk capital charge, an insurer may look-through the trust to its underlying asset where it has sufficient information to identify the underlying assets of the trust. The insurer’s share of the underlying assets of the trust is to be reported under item 7 of this form per type of asset.
Unlisted trusts (excluding CMT) – ‘without look-through’
Disclose the aggregate value of the holdings that constitute investments in unlisted trusts.
Note: Do not include holdings of cash management trusts. These are to be disclosed on the form under item 3 to 6 (see below).
Also do not include holdings in a trust where the insurer has chosen to apply the ‘look-through’ basis. For the purposes of calculating the investment risk capital charge, an insurer may ‘look-through’ the trust to its underlying asset where it has sufficient information to identify the underlying assets of the trust. The insurer’s share of the underlying assets of the trust is to be reported under item 7 of this form per type of asset.
Cash Management Trusts with a counterparty rating of Grade 1 or 2
List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 1 or 2. Refer to GPS 114 for detail on counterparty rating grades.
Cash Management Trusts with a counterparty rating of Grade 3
List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 3. Refer to GPS 114 for detail on counterparty rating grades.
Cash Management Trusts with a counterparty rating of Grade 4 or unrated
List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 4 or are unrated. Refer to GPS 114 for detail on counterparty rating grades.
Cash Management Trusts with a counterparty rating of Grade 5
List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 5. Refer to GPS 114 for detail on counterparty rating grades.
Unit trusts on a ‘look-through basis’
If the insurer has sufficient information on the underlying assets of the trust, the insurer may apply the relevant investment capital factors to the underlying assets of that trust rather than apply the investment capital factors on the aggregate value of the trust.
Record the fair value of the insurer’s share in the underlying assets depending on the type of the asset in accordance with GPS 114.
| Column | Asset | Investment Capital Factor |
| 7.1 | Assets with an investment risk charge of 0.5%: · Cash (notes and coins) · Debt obligations of: · the Commonwealth Government; · an Australian State or Territory government; or · the national government of a foreign country where: - the security has a Grade 1 counterparty rating; or, if not rated, - the long-term, foreign currency counterparty rating of that country is Grade 1 · Assets in respect of anticipated recoveries from the Commonwealth Government or from an Australian State or Territory government · GST receivables (input tax credits) | 0.5% |
| 7.2 | Assets with an investment risk charge of 1%: · Any debt obligation that matures or is redeemable in less than one year with a counterparty rating of Grade 1 or 2 (excluding subordinated debt and debt obligations of government dealt with specifically in this Table) · Cash management trusts with a counterparty rating of Grade 1 or 2 | 1% |
| 7.3 | Assets with an investment risk charge of 2%: · Any other debt obligation (that matures or is redeemable in one year or more) with a counterparty rating of Grade 1 or 2 (excluding subordinated debt and debt obligations of government dealt with specifically in this Table) | 2% |
| 7.4 | Assets with an investment risk charge of 4%: · Any other debt obligation with a counterparty rating of Grade 3 (excluding subordinated debt) · Cash management trusts with a counterparty rating of Grade 3 | 4% |
| 7.5 | Assets with an investment risk charge of 6%: · Any other debt obligation with a counterparty rating of Grade 4 (excluding subordinated debt) · Cash management trusts with a counterparty rating of Grade 4 | 6% |
| 7.6 | Assets with an investment risk charge of 8%: · Any other debt obligation with a counterparty rating of Grade 5 (excluding unlisted subordinated debt) · Cash management trusts with a counterparty rating of Grade 5 · Listed subordinated debt | 8% |
| 7.7 | Assets with an investment risk charge of 10%: · Unlisted subordinated debt | 10% |
| 7.8 | Listed Equity: · Listed equity instruments Report all equity securities at fair value. Include: · Equity in listed companies, domestic and overseas; and · Securities (stock) lent or sold under repurchase agreements, where the transaction does not effectively result in the transfer of the rights of ownership of the securities. Exclude: · Options and warrants, include these as Financial Derivatives on GRF 160.0 Derivatives Activity and Risk Charge; and · Securities borrowed or purchased under resale agreements, where the transaction does not effectively result in the transfer of the rights of ownership of the securities. | N/A – see GRF 140.1 Investments – Direct Equity Holdings and Risk Charge |
| 7.9 | Unlisted Equity: · Unlisted equity instruments Report all equity securities at fair value. Include: · Equity in unlisted companies, domestic and overseas; and · Securities (stock) lent or sold under repurchase agreements, where the transaction does not effectively result in the transfer of the rights of ownership of the securities. Exclude: · Options and warrants, include these as Financial Derivatives on GRF 160.0 Derivatives Activity and Risk Charge; and · Securities borrowed or purchased under resale agreements, where the transaction does not effectively result in the transfer of the rights of ownership of the securities. | 20% |
| 7.10 | Listed Property Trust: · Listed Property trusts | 16% |
| 7.11 | Unlisted Property Trust: · Direct holdings of real estate · Unlisted Property trusts | 20% |
| 7.12 | Other - Listed | 16% |
| 7.13 | Other - Unlisted | 20% |
Unrated assets or exposures must be classified as Grade 4.
Total holdings in indirect investment vehicles
This item is automatically calculated by the form and represents the sum of item 1 to 7.13.
Total holdings in indirect investment vehicles representing policyholders’ funds
Disclose the aggregate balance of investments disclosed in Part 1 that are designated as representing policyholders’ funds, where the insurer has established the investment management mandates along these terms to reflect the different cashflow/risk and return requirements of shareholders’ funds from policyholders’ funds/technical reserves.
Policyholders’ funds are also referred to as technical reserves/funds. Use of the term does not imply ownership of these funds by policyholders, like under life insurance.
Total holdings in indirect investment vehicles representing shareholders’ funds
Disclose the aggregate balance of investments disclosed in Part 1 that are designated as representing shareholders’ funds, where the insurer has established the investment management mandates along these terms to reflect the different cashflow/risk and return requirements of shareholders’ funds from policyholders’ funds/technical reserves.
Aggregate holdings representing exposure to the following asset classes:
This disclosure is separate from disclosure requirements contained in items 1 – 7 of Part 2. The aggregate value of the holdings disclosed in Part 1 must also be disclosed in accordance to the nature of the market exposure of the underlying assets (i.e. fixed interest related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosed in accordance with the fund’s advised asset allocation. The values reported need to be separated according to whether the holdings represent policyholder funds or shareholder funds.
Total Investment Risk Charge
This item is automatically calculated by the form.
0
0
0