Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2006 Reporting Standard GRS 110.0 (2007) Minimum Capital Requirement (Cth)
Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2006
Reporting Standard GRS 110.0 (2007) Minimum Capital Requirement
Financial Sector (Collection of Data) Act 2001
I, John Roy Trowbridge, 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 Reporting Standard GRS 110.0 (2005) Minimum Capital Requirement which is in force as at the date of this determination (the old standard); and
DETERMINE Reporting Standard GRS 110.0 (2007) Minimum Capital Requirement 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 standard shall cease to apply, on the later of 1 January 2007 and the date of registration on the Federal Register of Legislative Instruments.
Dated 15 December 2006
[signed]
………………………
John Trowbridge
Member
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard GRS 110.0 (2007) Minimum Capital Requirement comprises 31 pages commencing on the next page.
Reporting Standard GRS 110.0 (2007)
Minimum Capital Requirement
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, in relation to their Minimum Capital Requirement calculated in accordance with Prudential Standard GPS 110 Capital Adequacy.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
the versions of Form GRF 110.0 Minimum Capital Requirement (Form GRF 110.0) designated for a ‘Licensed Insurer’ and ‘Branch Insurer’ and the associated instructions (which are attached and all form part of this reporting standard); and
Prudential Standard GPS 110 Capital Adequacy.
Purpose
Data collected in each version of Form GRF 110.0 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with Prudential Standard GPS 110 Capital Adequacy.
Application and commencement
This reporting standard applies to all insurers on and from 1 January 2007.
Information required
An insurer must provide APRA with the information required by the version of Form GRF 110.0 designated for a ‘Licensed Insurer’ for each reporting period.
A foreign insurer must provide APRA with the information required by the version of Form GRF 110.0 designated for a ‘Branch Insurer’ 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 Form GRF 110.0 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 5(b) if the agent has contacted APRA and advised that the agent cannot submit the information in electronic form under subparagraph 5(a).
Note: The ‘Direct to APRA’ application software and paper forms may be obtained from APRA.
Reporting periods and due dates
Subject to paragraph 7, 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 from an insurer by paragraph 3 or 4 read with subparagraph 6(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards.
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 6(a) or (b)).
The information required by paragraphs 3 and 4 of this reporting standard must be provided to APRA by the following times:
(a)in the case of the quarterly information referred to in subparagraph 6(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 referred to in subparagraph 6(b) – 4 months after the end of the reporting period to which the information relates.
Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate relating to the annual information referred to in subparagraph 6(b) must be provided to APRA by the time specified in subparagraph 8(b) of this reporting standard (unless an extension is granted under paragraph 9).
APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
The information provided by an insurer under this reporting standard 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 5(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 5(b), the completed form must be signed in accordance with paragraph 14.
If an insurer provides the information required by this reporting standard through an agent under either subparagraph 5(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 form as provided to APRA (whether it was provided under subparagraph 5(a) or (b)); and
(b)cause the paper copy to be signed in accordance with paragraph 14; and
(c)lodge the signed paper copy with APRA by mailing the completed form 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 to lodge the signed paper copy with APRA by varying this reporting standard in relation to the insurer).
Note: APRA may, for example, determine to waive the requirement under subparagraph 13(c) where an insurer has undertaken to retain the signed copy of the completed form 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 form by either:
(a)the Principal Executive Officer of the insurer; or
(b)the Chief Financial Officer of the insurer (whatever his or her official title may be).
Minor alterations to forms and instructions
APRA may make minor variations to:
(a)a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or
(b)the instructions to a form, to clarify their application to the form
without changing any substantive requirement in the form or instructions.
If APRA makes such a variation it must notify insurers in writing.
Transition
An insurer must report in relation to a reporting period ending prior to 1 January 2007 in accordance with the reporting standard that this reporting standard replaced.
Interpretation
In this reporting standard:
approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
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 6(a) or (b) or, if appropriate, paragraph 7.
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 110.0
Minimum Capital Requirement
Instruction Guide
Introduction
This form reports the summary of the risk charges, Minimum Capital Requirement (MCR), the capital base, net assets in Australia, and compliance with the capital requirements as prescribed in GPS 110 Capital Adequacy.
The individual risk charges and capital base summarised on this form are calculated in other forms. The form will automatically calculate the MCR of the reporting insurer based on the information reported for the individual risk charges. Additionally, information relating to the capital surplus/deficiency and capital ratios will be calculated automatically.
Audit requirements
This form 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 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. This means that:
the completed form for the financial year must be audited by the approved auditor of the insurer (see paragraph 49J(1)(a) of the Act);
the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));
the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));
the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entity
Authorised insurance entities including a mutual (refer to form for ‘Licensed Insurer’); and
Authorised reinsurance entities (refer to form for ‘Licensed Insurer’).
A general insurer must, at all times, maintain a capital base in excess of its Minimum Capital Requirement as required by GPS 110 Capital Adequacy.
Unit of measurement
The form reports in Australian currency rounded in thousands of dollars (no decimal place). Ratios are expressed to 2 decimal places.
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 110.0 Minimum Capital Requirement.
Specific instructions
GRF 130.0 Off Balance Sheet Business - Credit Substitutes Provided and Risk Charge
This represents the total capital charge applicable for the credit substitutes provided by the reporting insurer. This amount is calculated in item titled “Total Off balance sheet required risk charge” in GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge
This represents the total capital charge applicable for the charges and encumbrances granted by the reporting insurer. This amount is calculated in the item titled “Adjusted required capital charge” in GRF 130.2 Off Balance Sheet Business – Charges Granted and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Investment Risk Charge calculated from the following forms:
3.1.GRF 140.0 Investments - Direct Interest Rate Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct interest holdings of the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.0 Investments - Direct Interest Rate Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.2.GRF 140.1 Investments - Direct Equity Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct equity holdings of the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.3.GRF 140.2 Investments - Direct Property Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct property holdings of the reporting insurer. This figure is calculated in column headed “Investment Risk Charge” for line item titled “Total direct property investments” in GRF 140.2 Investments - Direct Property Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.4.GRF 140.3 Investments - Loans and Advances and Risk Charge
This represents the total investment risk charge applicable for the loans and advances provided by the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.3 Investments – Loans and Advances and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.5.GRF 140.4 Investments - Indirectly Held by Insurer and Risk Charge
This represents the total investment risk charge applicable for assets that are indirectly held by the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.6.GRF 300.0 Statement of Financial Position
This represents the total investment risk charge for all applicable assets listed in GRF 300.0 Statement of Financial Position – Licensed Insurer. It excludes assets that are subject to a risk charge under the forms GRF 140.0 – 140.4, GRF 150.0 and assets that are deducted from the Capital Base.
This figure represents the sum of the individual investment risk charges calculated under the column heading “Investment Risk Charge” and is reported for item 15 in GRF 300.0 Statement of Financial Position. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.7.Total Investment Risk Charge
This item represents the total investment risk charge. This figure will be automatically calculated by the form.
GRF 130.3 Off Balance Sheet Business - Credit Support Received (Investment Risk Charge Reduction)
The investment risk charge may be reduced where the insurer holds certain types of collateral against an asset, or where an asset has been guaranteed, as a means of reducing risk. Accordingly this item represents the ‘rebate’ of the investment risk charge on these assets that is calculated in either GRF 140.0 – GRF 140.4 or GRF 300.0 Statement of Financial Position. The rebate represents the difference between the investment risk capital charge applicable to the value of the eligible collateral or guarantee provided to the insurer and the investment risk capital charge applicable to the asset(s) being supported.
This item is calculated in GRF 130.3 Off Balance Sheet Business - Credit Support Received and represents the sum of “Adjustment to Investment Capital Charge” in ‘Part A - Eligible Collateral Provided to Reporting Insurer’ and ‘Part B - Guarantees Provided to Reporting Insurer’.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 150.0 Asset Exposure Concentrations and Risk Charge
This represents the total investment concentration risk charge for exposures listed in GRF 150.0 Asset Exposure Concentrations and Risk Charge. This figure represents the item “Net concentration risk charge” calculated in GRF 150.0 Asset Exposure Concentrations and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 160.0 Derivatives Activity and Risk Charge
This represents the total investment risk charge for derivative exposures listed in GRF 160.0 Derivatives Activity and Risk Charge. This figure represents the sum of the individual investment risk charges reported in the item titled ‘Risk Charge’ in the GRF 160.0 Derivatives Activity and Risk Charge series. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 170.0 Concentration Risk Charge
This represents the total concentration risk charge applicable for the reporting insurer. This figure represents the amount disclosed in item “Total Concentration Risk Charge” in GRF 170.0 Concentration Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge
This represents the total insurance risk charge applicable in response to the risk that the true value of the net outstanding claims provision (OCP) of an insurer is greater than the value determined under GPS 310 Audit and Actuarial Reporting and Valuation. This figure represents the “Total” line item under the column headed “OCP Insurance Risk Charge” in GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 210.1 Premium Liabilities - Insurance Risk Charge
This represents the total insurance risk charge applicable in response to the risk that the true value of the net premiums liabilities of an insurer is greater than the value determined under GPS 310 Audit and Actuarial Reporting and Valuation. This figure represents the “Total” line item under the column headed “Premium Liabilities Insurance Risk Charge” in GRF 210.1 Premium Liabilities - Insurance Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Total variation in capital charges as approved by APRA
Report the variation in capital charges in this item with a brief description (no more than 200 characters) and the amount of each variation which has been approved by APRA. A reduction in risk charges resulting from variations has to be reported as a negative number while any increase needs to be reported as a positive number.
The total variation is calculated automatically by the form.
Minimum Capital Requirement
This item is automatically calculated by the form.
It represents the sum of the items 1-3 and 5-10 (as reported in GRF 110.0 Minimum Capital Requirement) less item 4 and is calculated as under:
Add
GRF 130.0 Off Balance Sheet Business - Credit Substitutes Provided and Risk Charge;
GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge;
Total Investment Risk Charge;
GRF 150.0 Asset Exposure Concentrations and Risk Charge;
GRF 160.0 Derivatives Activity and Risk Charge;
GRF 170.0 Concentration Risk Charge;
GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge;
GRF 210.1 Premium Liabilities - Insurance Risk Charge; and
Total variation in capital charges as approved by APRA.
Less
GRF 130.3 Off Balance Sheet Business - Credit Support Received.
GRF 120.0 Determination of Capital Base
This represents the total eligible capital base of the insurer. This amount is calculated in item titled “Total Capital Base” in GRF 120.0 Determination of Capital Base. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Capital Surplus (Deficiency)
This figure represents the value of item titled “GRF 120.0 Determination of Capital Base” less the amount calculated for item titled “Minimum Capital Requirement”.
This figure will be automatically calculated by the form.
Solvency Coverage
This figure represents the value of item titled “GRF 120.0 Determination of Capital Base” divided by the value of item titled “Minimum Capital Requirement”.
This figure will be automatically calculated by the form.
Capital Adequacy Ratio %
This is another way of looking at the solvency coverage and this figure represents the value of item titled “Minimum Capital Requirement” divided by the value of item titled “GRF 120.0 Determination of Capital Base”.
This figure will be automatically calculated by the form.
Adjusted Net Assets in Australia
‘Adjusted net assets in Australia’ refer to total assets less assets that are excluded as ‘assets in Australia’ for the purpose of section 28 of the Act.
Adjusted Net Assets in Australia are determined as under:
16.1.Net Assets per form GRF 300.0 Statement of Financial Position
If the insurer does not have any business (i.e. assets and liabilities) outside of Australia then the insurer does not have to complete GRF 300.0 Statement of Financial Position (Inside Australia)and only has to complete GRF 300.0 Statement of Financial Position (Licensed Insurer). In this case, the amount reported in item 16.1 “Net Assets” on GRF 110.0 Minimum Capital Requirement must agree to the value of item titled “Net Assets” on GRF 300.0 Statement of Financial Position (Licensed Insurer).
Where the insurer has business outside of Australia and GRF 300.0 Statement of Financial Position (Inside Australia) needs to be completed, the amount reported in item 16.1 “Net Assets” on GRF 110.0 Minimum Capital Requirement must agree to the value of item titled “Net Assets” on GRF 300.0 Statement of Financial Position (Inside Australia).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Less:
Assets specifically excluded from being considered inside Australia by GPS 120 Assets in Australia.
16.2.Deductions for assets specifically excluded from being considered inside Australia:
16.2.1.Goodwill
This figure represents the value of the following items from GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position;
·Item 11.1 “Goodwill”;
Less:
·Item 11.2 “Accumulated impairment – goodwill”;
Plus:
·Item 9.5.1.1 “The component of the value of investments in listed equity instruments or units in listed trusts, which represents the value of purchased goodwill (and other intangible assets) in relation to the acquisition of controlled entities”; and
·Item 9.5.2.1 “The component of the value of unlisted equity instruments or units in unlisted trusts, which represents the value of purchased goodwill (and other intangible assets) in relation to the acquisition of controlled entities”;
Plus:
The following item from GRF 140.1 Investments – Direct Equity Holdings and Risk Charge (where it includes amounts inside Australia);
·Item 4.1 “Total equity securities not listed on primary board of stock exchanges or unlisted, of which: represents the value of purchased goodwill (and other intangible assets) in relation to the acquisition of controlled entities”
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.2.Other intangible assets
This figure represents the value of the following items from GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position;
·Item 11.3.3 Total identifiable intangible assets;
Less:
·Item 11.4.3 Total accumulated amortisation and impairment - Identifiable intangible assets
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.3.Deferred Tax Assets (net of any Deferred Tax Liabilities)
Disclose the value of Deferred tax assets (net of any deferred tax liabilities) recognised in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
The amount entered in this field must be either positive or zero, if the result of the netting calculation is a negative, enter zero.
16.2.4.Surplus in defined benefit superannuation plan
Disclose the value of any surplus, net of deferred tax liabilities, in any insurer employer-sponsored defined benefit superannuation fund, unless otherwise approved, in writing, by APRA. Any excluded surplus must reverse any associated deferred tax liability from Tier 1 capital. The amount reported in GRF 110.0 Minimum Capital Requirement must not be greater than the amount reported in items 5.3 plus 13.2 of GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
Deferred Tax Liabilities should not be counted twice in 16.2.3 and at 16.2.4.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.5.Holdings of own Tier 1 capital instruments
Disclose the value of holdings of own Tier 1 capital instruments of the insurer.
16.2.6.Net unrealised fair value gains (losses) from changes in the GI's own credit worthiness
This item only applies to general insurers that have designated their own debt instruments at fair value under the fair value option in AASB 139.
Deduct/(add back) any unrealised fair value gains/(losses) included in Tier 1 capital (before deductions) arising from changes in the reporting general insurer’s own credit worthiness (e.g. reduction in fair value of the general insurer’s outstanding debt due to change in credit rating).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.7.Net unrealised gains (losses) on effective cash flow hedges
Disclose the value of cumulative fair value gains and losses on effective cash flow hedges reflected in retained earnings or reserves included in Tier 1 capital which do not offset gains or losses on revaluations in reserves included in Tier 1 capital. Deduct the gains on hedges and add back the losses.
16.2.8.Reinsurance recoveries related to reinsurance contracts that do not meet the reinsurance documentation test
The figure for Reinsurance recoveries related to reinsurance contracts that do not meet the reinsurance documentation test represents the value of item 2.4.15 plus item 2.5.5 plus item 7.3.15 plus item 7.4.5 recognised in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.9.Profits on proportional reinsurance treaties for which the underlying risks have not been accepted by the direct insurer and the treaties are subject to the premium receivable deduction
Disclose the profits on proportional reinsurance treaties for which the underlying risks have not been accepted by the direct insurer and the treaties are subject to the premium receivable deduction as specified in GPS 110 Capital Adequacy.
The amount reported in this item should reconcile to item 2.3.12 plus item 7.2.6 reported in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.10.Other deductions
Disclose other deductions such as:
·Negative movement over the amount available in the revaluation reserve
Disclose any negative movement over the amount available in the respective revaluation reserves for the following items, to the extent not already accounted for in current year earnings or retained earnings:
· Property not held at fair value;
· Investments in subsidiaries not held at fair value; or
· Investment in associates, including any excess of the share of losses in associates under equity accounting.
·Identified impairment of certain assets
Disclose any identified impairment of an asset not forming part of a class of assets to which an asset revaluation reserve in Upper Tier 2 capital applies and where the impairment has not already been taken into account in the profit and loss.
·Holdings of own Upper Tier 2 capital instruments
Disclose the value of own holdings of Upper Tier 2 capital instruments.
·Holdings of own Lower Tier 2 capital instruments
Disclose the value of own holdings of Lower Tier 2 capital instruments.
16.2.11.Variation in deduction by other adjustments approved by APRA
Include any additions or reduction in deductions that have been approved by APRA.
16.3.Assets under a fixed or floating charge, mortgage or other security to the extent of the indebtedness secured by the value of those assets.
Such assets are excluded from being considered inside Australia up to the value of the charge/encumbrance. Where the charge over the assets is only given to support the value of insurance liabilities of the insurer, only the excess of the value of the assets charged/encumbered, over the value of the insurance liabilities, is excluded from being considered inside Australia.
This amount represents the total of all items reported in column headed “Excess of Charge Assets over Liabilities Supported” in GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.4.Adjusted Net Assets in Australia
This amount is automatically calculated by the form.
Reporting Form GRF 110.0
Minimum Capital Requirement
Instruction Guide
Introduction
This form reports the summary of the risk charges, Minimum Capital Requirement (MCR), the capital base, net assets in Australia, and compliance with the capital requirements as prescribed in GPS 110 Capital Adequacy.
The individual risk charges and capital base summarised on this form are calculated in other forms. The form will automatically calculate the MCR of the reporting insurer based on the information reported for the individual risk charges. Additionally, information relating to the capital surplus/deficiency and capital ratios will be calculated automatically.
Audit requirements
This form 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 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 approved auditor of the insurer (see paragraph 49J(1)(a) of the Act);
the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2));
the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s yearly statutory accounts), which must contain statements of the auditor’s opinion on the matters required by the prudential standards to be dealt with in the certificate (subsection 49J(3));
the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entity
Australian branches of foreign insurer/reinsurer (refer to form for ‘Branch Insurer’).
A branch operation is required to maintain assets in Australia in excess of its liabilities in Australia, of an amount at least equal to its MCR, where the MCR is calculated on the total branch operations.
Unit of measurement
The form reports in Australian currency rounded in thousands of dollars (no decimal place). Ratios are expressed to 2 decimal places.
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 110.0 Minimum Capital Requirement.
Specific instructions
GRF 130.0 Off Balance Sheet Business - Credit Substitutes Provided and Risk Charge
This represents the total capital charge applicable for the credit substitutes provided by the reporting insurer. This amount is calculated in item titled “Total Off balance sheet required risk charge” in GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge
This represents the total capital charge applicable for the charges and encumbrances granted by the reporting insurer. This amount is calculated in the item titled “Adjusted required capital charge” in GRF 130.2 Off Balance Sheet Business – Charges Granted and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Investment Risk Charge calculated from the following forms:
4.1.GRF 140.0 Investments - Direct Interest Rate Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct interest holdings of the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.0 Investments - Direct Interest Rate Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
4.2.GRF 140.1 Investments - Direct Equity Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct equity holdings of the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
4.3.GRF 140.2 Investments - Direct Property Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct property holdings of the reporting insurer. This figure is calculated in column headed “Investment Risk Charge” for line item titled “Total direct property investments” in GRF 140.2 Investments - Direct Property Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
4.4.GRF 140.3 Investments - Loans and Advances and Risk Charge
This represents the total investment risk charge applicable for the loans and advances provided by the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.3 Investments – Loans and Advances and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
4.5.GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge
This represents the total investment risk charge applicable for assets that are indirectly held by the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
4.6.GRF 300.0 Statement of Financial Position
This represents the total investment risk charge for applicable assets listed in GRF 300.0 Statement of Financial Position (Branch Insurer). It excludes assets that are subject to a risk charge under GRF 140.0 – 140.4, GRF 150.0 Asset Exposure Concentrations and Risk Charge and assets that are deducted from the Capital Base.
This figure represents the sum of the individual investment risk charges calculated under the column heading “Investment Risk Charge” and is calculated at item 15 in GRF 300.0 Statement of Financial Position. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
4.7.Total Investment Risk Charge
This item represents the total investment risk charge. This figure will be automatically calculated by the form.
GRF 130.3 Off Balance Sheet Business - Credit Support Received (Investment Risk Charge Reduction)
The investment risk charge may be reduced where the insurer holds certain types of collateral against an asset, or where an asset has been guaranteed, as a means of reducing risk. Accordingly this item represents the ‘rebate’ of the investment risk charge on these assets that is calculated in either GRF 140.0 – GRF 140.4 or GRF 300.0 Statement of Financial Position. The rebate represents the difference between the investment risk capital charge applicable to the value of the eligible collateral or guarantee provided to the insurer and the investment risk capital charge applicable to the asset(s) being supported.
This item is calculated in GRF 130.3 Off Balance Sheet Business - Credit Support Received and represents the sum of “Adjustment to Investment Capital Charge” in ‘Part A - Eligible Collateral Provided to Reporting Insurer’ and ‘Part B - Guarantees Provided to Reporting Insurer’.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 150.0 Asset Exposure Concentrations and Risk Charge
This represents the total investment concentration risk charge for exposures listed in GRF 150.0 Asset Exposure Concentrations and Risk Charge. This figure represents the item “Net concentration risk charge” calculated in GRF 150.0 Asset Exposure Concentrations and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 160.0 Derivatives Activity and Risk Charge
This represents the total investment risk charge for derivative exposures listed in GRF 160.0 Derivatives Activity and Risk Charge. This figure represents the sum of the individual investment risk charges reported in the item titled “Risk Charge” in the GRF 160.0 Derivatives Activity and Risk Charge series. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 170.0 Concentration Risk Charge
This represents the total concentration risk charge applicable for the reporting insurer. This figure represents the amount disclosed in item “Total Maximum Event Retention Charge” in GRF 170.0 Concentration Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge
This represents the total insurance risk charge applicable in response to the risk that the true value of the net outstanding claims provision (OCP) of an insurer is greater than the value determined under GPS 310 Audit and Actuarial Reporting and Valuation. This figure represents the “Total” line item under the column headed “OCP Insurance Risk Charge” in GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
GRF 210.1 Premium Liabilities - Insurance Risk Charge
This represents the total insurance risk charge applicable in response to the risk that the true value of the net premium liabilities of an insurer is greater than the value determined under GPS 310 Audit and Actuarial Reporting and Valuation. This figure represents the “Total” line item under the column headed “Premium Liabilities Insurance Risk Charge” in GRF 210.1 Premium Liabilities - Insurance Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Total variation in capital charges as approved by APRA
Report the variation in capital charges in this item with a brief description (no more than 200 characters) and the amount of each variation which has been approved by APRA. A reduction in capital charges resulting from variations has to be reported as a negative number while any increase needs to be reported as a positive number.
The total variation is calculated automatically by the form.
Minimum Capital Requirement
This item is automatically calculated by the form.
It represents the sum of the items 1-3 and 5-10 (as reported in GRF 110.0 Minimum Capital Requirement) less item 4 and is calculated as under:
Add
GRF 130.0 Off Balance Sheet Business - Credit Substitutes Provided and Risk Charge;
GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge;
Total Investment Risk Charge;
GRF 150.0 Asset Exposure Concentrations and Risk Charge;
GRF 160.0 Derivatives Activity and Risk Charge;
GRF 170.0 Concentration Risk Charge;
GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge;
GRF 210.1 Premium Liabilities - Insurance Risk Charge; and
Total variation in capital charges as approved by APRA.
Less
GRF 130.3 Off Balance Sheet Business - Credit Support Received;
Adjusted Net Assets in Australia
‘Adjusted net assets in Australia’ refer to total assets less assets that are excluded as ‘assets in Australia’ for the purpose of section 28 of the Act.
Adjusted Net Assets in Australia are determined as under:
12.1.Net Assets per form GRF 300.0 Statement of Financial Position
If the insurer does not have any business (i.e. assets and liabilities) outside of Australia then the insurer does not have to complete GRF 300.0 Statement of Financial Position (Inside Australia) and only has to complete GRF 300.0 Statement of Financial Position (Branch Insurer). In this case, the amount reported in item 12.1 “Net Assets” on GRF 110.0 Minimum Capital Requirement must agree to the value of item titled “Net Assets” on GRF 300.0 Statement of Financial Position (Branch Insurer).
Where the insurer has business outside of Australia and GRF 300.0 Statement of Financial Position (Inside Australia) needs to be completed, the amount reported in item “12.1 Net Assets” on GRF 110.0 Minimum Capital Requirement must agree to the value of item titled “Net Assets” on GRF 300.0 Statement of Financial Position (Inside Australia).
This figure needs to be manually entered into this reporting item in GRF 110.0 Minimum Capital Requirement.
Add:
12.2.Technical insurance liability provisions in excess of liability valuation
The figure for this data item must agree with the value calculated for item titled “Technical insurance liability provisions in excess of liability valuation” reported on either of the following applicable forms:
GRF 300.0 Statement of Financial Position (Inside Australia) will be the appropriate forms where the insurer has business outside Australia. This form is only completed by insurers that have business outside of Australia (i.e. assets, liabilities); or
GRF 300.0 Statement of Financial Position (Branch Insurer) will be the appropriate form where the insurer has no business outside of Australia (i.e. assets, liabilities).
Less:
12.3.Tax effect of technical insurance liability provisions in excess of liability valuation
The figure for this data item must agree with the value calculated for item titled “Tax effect of technical insurance liability provisions in excess of liability valuation” reported on either of the following applicable forms:
GRF 300.0 Statement of Financial Position (Inside Australia) will be the appropriate forms where the insurer has business outside Australia. This form is only completed by insurers that have business outside of Australia (i.e. assets, liabilities); or
GRF 300.0 Statement of Financial Position (Branch Insurer) will be the appropriate form where the insurer has no business outside of Australia (i.e. assets, liabilities).
12.4.Deductions for assets specifically excluding from being considered inside Australia
These amounts are specifically excluded from being considered inside Australia by GPS 120 Assets in Australia.
12.4.1.Goodwill
This figure represents the value of the following items from GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position (Branch Insurer);
·Item 11.1 “Goodwill”;
Less:
·Item 11.2 “Accumulated impairment – goodwill”;
Plus:
The following item from GRF 140.1 Investments – Direct Equity Holdings and Risk Charge (where they include amounts inside Australia);
·Item 4.1 “Total equity securities not listed on primary board of stock exchanges or unlisted, of which: represents the value of purchased goodwill (and other intangible assets) in relation to the acquisition of controlled entities”
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.4.2.Other intangible assets
This figure represents the value of the following items from GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position (Branch Insurer);
·Item 11.3.3 Total identifiable intangible assets;
Less:
Item 11.4.3 Total accumulated amortisation and impairment - Identifiable intangible assets
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.4.3.Deferred Tax Assets (net of any Deferred Tax Liabilities).
Disclose the value of Deferred tax assets (net of any deferred tax liabilities) recognised in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
The amount entered in this field must be either positive or zero, if the result of the netting calculation is a negative, enter zero.
12.4.4.Surplus in defined benefit superannuation plan
Disclose the value of any surplus, net of deferred tax liabilities, in any insurer employer-sponsored defined benefit superannuation fund, unless otherwise approved, in writing, by APRA. Any excluded surplus must reverse any associated deferred tax liability from Tier 1 capital. The amount reported in GRF 110.0 Minimum Capital Requirement must not be greater than the amount reported in items 5.3 plus 13.2 of GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position (Branch Insurer).
Deferred Tax Liabilities should not be counted twice in 12.4.3 and at 12.4.4.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.4.5.Net unrealised fair value gains (losses) from changes in the GI's own credit worthiness
Deduct/(add back) any unrealised fair value gains/(losses) arising from changes in the reporting GI’s own credit worthiness (e.g. reduction in fair value of the GI’s outstanding debt due to change in credit rating).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.4.6.Net unrealised gains (losses) on effective cash flow hedges
Disclose the value of cumulative fair value gains and losses on effective cash flow hedges reflected in retained earnings or reserves which do not offset gains or losses on revaluations in reserves. Deduct the gains on hedges and add back the losses.
12.4.7.Reinsurance recoveries related to reinsurance contracts that do not meet the reinsurance documentation test
The figure for Reinsurance recoveries related to reinsurance contracts that do not meet the reinsurance documentation test represents the value of item 2.4.15 plus item 2.5.5 plus item 7.3.15 plus item 7.4.5 recognised in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position (Branch Insurer).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.4.8.Profits on proportional reinsurance treaties for which the underlying risks have not been accepted by the direct insurer and the treaties are subject to the premium receivable deduction
Disclose the profits on proportional reinsurance treaties for which the underlying risks have not been accepted by the direct insurer and the treaties are subject to the premium receivable deduction as specified in GPS 110 Capital Adequacy.
The amount reported in this item should reconcile to item 2.3.12 plus item 7.2.6 reported in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position (Branch Insurer).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.4.9.Other deductions
Disclose other deductions such as:
·Negative movement over the amount available in the revaluation reserve
Disclose any negative movement over the amount available in the respective revaluation reserves for the following items, to the extent not already accounted for in current year earnings or retained earnings:
Property not held at fair value;
· Investments in subsidiaries not held at fair value; or
· Investment in associates, including any excess of the share of losses in associates under equity accounting.
· Identified impairment of certain assets
Disclose any identified impairment of an asset not forming part of a class of assets to which an asset revaluation reserve in Upper Tier 2 capital applies and where the impairment has not already been taken into account in the profit and loss.
·Holdings of own Upper Tier 2 capital instruments
Disclose the value of own holdings of Upper Tier 2 capital instruments.
·Holdings of own Lower Tier 2 capital instruments
Disclose the value of own holdings of Lower Tier 2 capital instruments.
12.4.10.Variation in deduction by other adjustments approved by APRA
Include any additions or reduction in deductions that have been approved by APRA.
12.5.Assets under a fixed or floating charge, mortgage or other security to the extent of the indebtedness secured by the value of those assets.
Such assets are excluded from being considered inside Australia up to the value of the charge/encumbrance. Where the charge over the assets is only given to support the value of insurance liabilities of the insurer, only the excess of the value of the assets charged/encumbered, over the value of the insurance liabilities, is excluded from being considered inside Australia.
This amount represents the total of all items reported in column headed “Excess of Charge Assets over Liabilities Supported” in GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
12.6.Adjusted Net Assets in Australia
This amount is automatically calculated by the form.
Capital Surplus (Deficiency)
This figure represents the value of item titled “Adjusted Net Assets in Australia” less the amount calculated for item titled “Minimum Capital Requirement”.
This figure will be automatically calculated by the form.
Solvency Coverage
This figure represents the value of item titled “Adjusted Net Assets in Australia” divided by the amount calculated for item titled “Minimum Capital Requirement”.
This figure will be automatically calculated by the form.
Capital Adequacy Ratio %
This is another way of looking at the solvency coverage and this figure represents the value of item titled “Minimum Capital Requirement” divided by the value of item titled “Adjusted Net Assets in Australia”.
This figure will be automatically calculated by the form.
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