Financial Sector (Collection of Data) exemption No. 3 of 2010
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Financial Sector (Collection of Data) Act 2001 (the Act), subsection 16(1)
Under subsection 16(1) of the Act, APRA may, by legislative instrument, exempt a financial sector entity from the requirement to comply with all the requirements or specified requirements contained in applicable reporting standards.
A.C.N. 000 007 492 Limited (formerly Rural and General Insurance Limited) (in liquidation) (“RGIL”) is a “financial sector entity” as defined by subsection 5(2) of the Act. Financial Sector (Collection of Data) exemption No. 3 of 2010 (the instrument) exempts RGIL from the requirements contained in the reporting standards relating to quarterly and annual returns specified in the Schedule.
- Background
On 2 July 2002 APRA issued an authorisation to carry on insurance business in Australia under subsection 12(1) of the Insurance Act 1973 to RGIL and RGIL is subject to conditions as varied from time to time. In particular, on 11 July 2002 APRA imposed conditions that RGIL was only authorised to conduct insurance business for the sole purpose of discharging liabilities which arose under policies entered into prior to 2 July 2002, i.e., RGIL went into run-off.
The Judicial Manager’s report, dated 29 September 2010, refers to a number of problems that have been identified which may cause difficulty in RGIL meeting its FSCODA reporting requirements, namely:
- a lack of historical policy records;
- poorly maintained claims files and under-reserving;
- poor management and pursuance of reinsurance recoveries that may lead to avoidance or discount on those recoveries;
- lack of information to support loan transactions; and
- the lack of a run-off plan.
The company is in liquidation and cannot meet its financial obligations as and when they fall due. An exemption would alleviate some of the further strain on the limited financial resources currently available to the RGIL Liquidator.
Further, given that:
- RGIL has been in run off since 2002; and
- there are a limited number of outstanding claims;
there is minimal need for RGIL’s compliance with the FSCODA for the purposes of APRA’s prudential supervision of the financial sector.
2. Purpose of the instrument
The purpose of the instrument is to exempt A.C.N. 000 007 492 Limited (formerly Rural and General Insurance Limited) (in liquidation) from all of the requirements relating to quarterly and annual reporting in the following reporting standards:
GRS 110.0 (2008) Minimum Capital Requirement |
GRS 120.0 (2008) Determination of Capital Base |
GRS 130.0 (2008) Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge |
GRS 130.1 (2008) Off Balance Sheet Business – Liquidity Support Facilities Obtained |
GRS 130.2 (2008) Off Balance Sheet Business – Charges Granted and Risk Charge |
GRS 130.3 (2008) Off Balance Sheet Business – Credit Support Received |
GRS 140.0 (2008) Investments – Direct Interest Rate Holdings and Risk Charge |
GRS 140.1 (2008) Investments – Direct Equity Holdings and Risk Charge |
GRS 140.2 (2008) Investments – Direct Property Holdings and Risk Charge |
GRS 140.3 (2008) Investments – Loans and Advances and Risk Charge |
GRS 140.4 (2008) Investments – Indirectly held by Insurer and Risk Charge |
GRS 150.0 (2008) Asset Exposure Concentrations and Risk Charge |
GRS 160.0 (2008) Derivative Activity and Risk Charge |
GRS 170.0 (2008) Concentration Risk Charge |
GRS 210.0 (2008) Outstanding Claims Provision – Insurance Risk Charge |
GRS 210.1 (2008) Premium Liabilities – Insurance Risk Charge |
GRS 300.0 (2008) Statement of Financial Position |
GRS 301.0 (2008) Reinsurance Assets and Risk Charge |
GRS 310.0 (2008) Statement of Financial Performance |
GRS 310.1 (2008) Premium Revenue and Reinsurance Expense |
GRS 310.2 (2008) Claims Expense and Reinsurance Recoveries |
GRS 310.3 (2008) Investment and Operating Income and Expense |
GRS 320.0 (2008) Reconciliation of Annual Disclosure |
GRS 400.0 (2008) Statement of Risk by Country |
GRS 410.0 (2008) Movement in Outstanding Claims Provision |
GRS 420.0 (2008) Premium Revenue by State and Territory of Australia |
GRS 430.0 (2008) Claims Expense by State and Territory of Australia |
GRS 440.0 (2008) Claims Development Tables |
3. Consultation
APRA has been in consultation with RGIL in relation to this issue.
Overview
The Financial Sector (Collection of Data) exemption No. 3 of 2010, issued under the Financial Sector (Collection of Data) Act 2001, aims to address the specific challenges faced by A.C.N. 000 007 492 Limited (formerly Rural and General Insurance Limited) (in liquidation) in fulfilling its reporting obligations. Enacted by the Australian Prudential Regulation Authority (APRA), the instrument seeks to alleviate the strain on the limited financial resources of the liquidator, given the company's prolonged run-off status since 2002 and the minimal need for compliance with the Financial Sector (Collection of Data) Act for the purposes of prudential supervision. The policy objective of the exemption is to provide relief to the liquidator by exempting the entity from the exhaustive reporting requirements that would otherwise impede its operations.
Scope and Application
The Financial Sector (Collection of Data) exemption No. 3 of 2010 applies to A.C.N. 000 007 492 Limited, previously known as Rural and General Insurance Limited (RGIL), which is a financial sector entity as defined by subsection 5(2) of the Financial Sector (Collection of Data) Act 2001. This instrument, issued by the Australian Prudential Regulation Authority (APRA) under the authority granted by subsection 16(1) of the Act, exempts RGIL from complying with certain reporting standards related to quarterly and annual returns. The exemption is specifically tailored to address the unique circumstances of RGIL, which has been in run-off since 2002 and is currently in liquidation, thereby facing significant challenges in meeting its financial obligations. The exemption aims to alleviate some of the strain on the limited financial resources available to the RGIL Liquidator by exempting the company from the burden of extensive reporting requirements. This exemption does not extend to other entities or industries and is limited to the specified reporting standards outlined in the Schedule to the instrument. The exemption is applicable nationally, but it does not create any exclusions or exemptions beyond those explicitly stated in the instrument itself.
Key Provisions
The Financial Sector (Collection of Data) exemption No. 3 of 2010 (the instrument) primarily operates under subsection 16(1) of the Financial Sector (Collection of Data) Act 2001 (the Act), which allows the Australian Prudential Regulation Authority (APRA) to exempt certain financial sector entities from specified reporting requirements. In this case, the instrument exempts A.C.N. 000 007 492 Limited, formerly known as Rural and General Insurance Limited (RGIL) and currently in liquidation, from complying with all the requirements or specified requirements contained in the applicable reporting standards as listed in the Schedule to the instrument (subsection 16(1)). These reporting standards pertain to various aspects of financial reporting, including capital requirements, investments, asset exposure, and claims provisions, among others.
The obligations imposed by this Act on RGIL, as now exempt from the specified reporting standards, include ceasing to compile and submit the quarterly and annual returns required by the listed reporting standards. This exemption acknowledges the practical difficulties RGIL faces, such as the lack of historical policy records, poorly maintained claims files, and other logistical issues that impede their ability to meet these reporting obligations effectively. Given the company’s status in liquidation and its primary focus on discharging pre-existing liabilities, APRA has determined that continued compliance with these reporting standards is unnecessary and would place an undue burden on the company’s limited resources.
Under the Financial Sector (Collection of Data) Act 2001, non-compliance with the specified reporting requirements can lead to various penalties. However, the exemption provided by the instrument relieves RGIL from these potential penalties concerning the specified reporting standards. It is important to note that while RGIL is exempt from these particular reporting obligations, the company remains subject to other relevant legal and regulatory requirements. The exemptions do not absolve RGIL from broader obligations under insolvency law or other statutory provisions that may apply.
In summary, the Financial Sector (Collection of Data) exemption No. 3 of 2010 provides a significant relief measure for RGIL, allowing the company to avoid the administrative burden of complying with the detailed reporting standards outlined in the Schedule. This exemption acknowledges the practical challenges RGIL faces and aligns with APRA’s assessment that continued compliance is not necessary for prudential supervision purposes, given the company’s current status and operational focus.