Financial Sector (Collection of Data) determination No. 61 of 2006
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Issued by the authority of APRA
Paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (FSCOD Act) and subsection 33(3) of the Acts Interpretation Act 1901.
Under subsection 13(1) of the FSCOD Act, APRA has power, in writing, to determine reporting standards that are required to be complied with by financial sector entities. Subsection 33(3) of the Acts Interpretation Act 1901 gives APRA power to revoke reporting standards so made.
Financial Sector (Collection of Data) determination No. 61 of 2006 (the instrument) revokes Reporting Standard LOLRS 800.2 (2005) Claim Data: Public and Product Liability and Professional Indemnity Insurance made by Financial Sector (Collection of Data) determination No. 34 of 2005 dated 21 June 2005 (the old reporting standard) and replaces it with a new reporting standard to rectify an error in the old reporting standard.
The instrument will come into force on the date of registration of the instrument on the Federal Register of Legislative Instruments.
- Background
This Explanatory Statement explains the changes being made by APRA to the reporting standard for Lloyd's which requires it to provide information in relation to public liability and professional indemnity insurance for the purposes of APRA's National Claims & Policies Database (NCPD).
2. Purpose of the instrument
The purpose of the instrument is to revoke the old reporting standard and replace it with a corresponding reporting standard which incorporates appropriate adjustments. APRA considered that it would be clearer and more effective to consolidate the necessary changes within a new instrument. For that reason, APRA decided to revoke and replace this reporting standard rather than to amend it.
3. Operation of the instrument
Under the reporting standard, Lloyd's must provide APRA with data on claims made or not settled during a half-yearly reporting period.
As with the old reporting standard, the information collected includes the class of business covered by the claim, its current status, the dates of loss and report, the jurisdiction of the claim, the nature of the loss and details of the likely case estimate, amongst other information.
A new definition for 'reportable claim' has been inserted into the reporting standard to replace the previous inaccurate definition. Definitions of 'reportable policy' and 'reportable facility business' have also consequently been removed as they are now redundant.
4. Consultation
As the instrument only changes the old reporting standard to remove an inaccurate definition of 'reportable claim' and replace it with a new and accurate definition, industry has not been consulted. Under the old reporting standard, industry has provided data in accordance with the new definition of ‘reportable claim’ on the understanding that this definition reflected APRA’s intention in relation to the operation of the reporting requirements. Consequently, Lloyd's will not experience any change in the extent of its reporting obligations to APRA.
Overview
The Financial Sector (Collection of Data) determination No. 61 of 2006 was enacted to address inaccuracies in the reporting standards required by financial sector entities under the Financial Sector (Collection of Data) Act 2001. This determination was issued by the Australian Prudential Regulation Authority (APRA) and is backed by subsection 13(1) of the FSCOD Act and subsection 33(3) of the Acts Interpretation Act 1901, empowering APRA to set and revoke reporting standards. The primary objective of this instrument is to rectify an error in the previous reporting standard, specifically concerning the definition of 'reportable claim' for Lloyd's, ensuring that the data collected aligns accurately with APRA’s requirements for its National Claims & Policies Database (NCPD). By replacing the old reporting standard with a new one that includes a corrected definition, APRA aims to enhance the clarity and effectiveness of the data collection process without imposing additional reporting burdens on the industry.
Scope and Application
The Financial Sector (Collection of Data) Determination No. 61 of 2006, made under the Financial Sector (Collection of Data) Act 2001, applies specifically to financial sector entities within Australia. The Australian Prudential Regulation Authority (APRA), which holds the power to issue such determinations under the Act, has used this authority to revoke an outdated reporting standard and replace it with a new one. The primary focus of this determination is on rectifying an error in the previously established reporting standard regarding the definition of 'reportable claim' for Lloyd's, ensuring that data collected aligns accurately with APRA's requirements for its National Claims & Policies Database (NCPD). The new reporting standard includes detailed data requirements, such as the class of business, current status of claims, dates of loss and report, jurisdiction, nature of loss, and case estimates, which Lloyd's must report to APRA on a half-yearly basis. The instrument, which revokes the old standard and introduces the corrected one, is designed to ensure clarity and effectiveness in the data collection process without altering Lloyd's existing reporting obligations.
Key Provisions
The Financial Sector (Collection of Data) determination No. 61 of 2006 primarily focuses on revoking the previous reporting standard, LOLRS 800.2 (2005) concerning Claim Data for Public and Product Liability and Professional Indemnity Insurance, and replacing it with a corrected version (sections 1 and 2). This new determination rectifies an error in the old reporting standard, specifically by amending the definition of 'reportable claim' and removing the definitions of 'reportable policy' and'reportable facility business', which are now redundant. The changes aim to ensure that Lloyd's provides accurate and relevant data to the Australian Prudential Regulation Authority (APRA) in relation to claims made under public liability and professional indemnity insurance.
The obligations under this new reporting standard require Lloyd's to continue submitting data to APRA on a half-yearly basis. The data must include the class of business, the current status of the claim, the dates of loss and report, the jurisdiction of the claim, the nature of the loss, and details of the likely case estimate, among other specified details (section 3). Despite the changes, Lloyd's is expected to continue providing the same breadth of information it has been supplying under the old reporting standard. The introduction of the new definition of 'reportable claim' is intended to clarify the scope of the data required without altering the overall reporting obligations.
Failure to comply with the new reporting standard could lead to various consequences. While the legislation does not explicitly state penalties or offences, non-compliance with APRA's data collection requirements can potentially result in regulatory scrutiny or enforcement actions by APRA. This could include administrative penalties, which may vary depending on the severity and impact of the non-compliance. Moreover, inaccurate or incomplete data submissions could undermine the effectiveness of APRA's monitoring and regulatory functions, possibly leading to broader financial stability concerns.
The determination comes into effect on the date of its registration on the Federal Register of Legislative Instruments. The streamlined approach of revoking and replacing the old reporting standard ensures that the necessary adjustments are clearly communicated and implemented without ambiguity. The decision not to consult the industry further was based on the assumption that Lloyd's has already been operating under the new definition of 'reportable claim', thereby minimizing any disruptive impact on their reporting practices.