Financial Sector (Collection of Data) (reporting standard) determination
Nos. 2 to 13 of 2010
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Financial Sector (Collection of Data) Act 2001, paragraph 13(1)(a) and section 15
Acts Interpretation Act 1901, subsection 33(3)
Under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the FCSOD Act), APRA may, by writing, determine reporting standards with which financial sector entities must comply. Such standards relate to reporting financial or accounting data and other information regarding the business or activities of the entities. Section 15 of the FSCOD Act gives APRA power to make a formal declaration of the date when reporting standards begin to apply. Subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to issue an instrument the power shall, unless the contrary intention appears, be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to revoke any such instrument.
1. Background
Since 2009, APRA has been in consultation with industry on proposals to simplify prudential reporting to APRA and for minor refinements to the reporting requirements to enhance APRA’s analysis of the financial performance of general insurers. APRA’s key proposal was the alignment of the balance sheet and income statement with the Australian equivalents to International Financial Reporting Standards (AIFRS).
2. Purpose of the instruments
The changes to the prudential reporting to APRA required the introduction of new and amended reporting requirements. The purpose of making the instruments is to replace existing reporting standards with reporting standards that implement APRA’s proposals.
Accordingly Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 12 of 2010 make the following reporting standards effective on and from the date of registration on the Federal Register of Legal Instruments:
- Reporting Standard GRS 110.0 Minimum Capital Requirement;
- Reporting Standard GRS 120.0 Determination of Capital Base;
- Reporting Standard GRS 140 Investments;
- Reporting Standard GRS 160.0 Derivative Activity and Risk Charge;
- Reporting Standard GRS 170.1 Maximum Event Retention and Risk Charge for Lenders Mortgage Insurers;
- Reporting Standard GRS 210 Insurance Risk Charge;
- Reporting Standard GRS 300.0 Statement of Financial Position;
- Reporting Standard GRS 301.0 Reinsurance Assets and Risk Charge;
- Reporting Standard GRS 310 Revenue, Expenses and Financial Performance;
- Reporting Standard GRS 400 Supplementary Reporting Information;
- Reporting Standard GRS 900.0 Transitional Arrangements 2010.
In addition, Reporting Standard GRS 320.0 (2008) Reconciliation of Annual Disclosure which came into effect on 3 November 2008 (determination No. 83 of 2008) is no longer required and has been revoked by determination No. 13 of 2010.
3. Operation of the instruments
Eleven new reporting standards and associated reporting forms will be issued under the FSCOD Act. These new reporting standards enable the reporting requirements of the revised prudential framework to take effect.
The collection of quarterly and annual data under the new general insurance prudential reporting requirements will commence for the first reporting period ending on or after the date of registration on the Federal Register of Legal Instruments.
Insurers will be required to report additional reconciling data items for the first submission of the quarterly and annual returns in accordance with Reporting Standard GRS 900.0 Transitional Arrangements 2010 (GRS 900.0). This will enable APRA to compare and reconcile key reporting items under the prior and new reporting basis.
4. Consultation
Section 17 of the Legislative Instruments Act 2003 requires consultation when a rule-maker makes a legislative instrument. APRA undertook consultation with the general insurance industry on the proposed changes to the current reporting framework from 3 December 2009 to 12 February 2010 . The consultation process involved the release of a discussion paper outlining the proposed changes, draft prudential standards, draft reporting forms and instructions, along with a quantitative impact study. APRA also met with numerous parties over the consultation period. APRA received 11 written responses and 45 completed quantitative impact studies. Submissions were generally supportive of the proposals. A response paper was issued by APRA on 23 July 2010, outlining the outcomes of the consultation process.
Overview
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 were made under the Financial Sector (Collection of Data) Act 2001 by the Australian Prudential Regulation Authority (APRA). These determinations were introduced to address the need for streamlined and more effective prudential reporting within the financial sector, particularly for general insurers. The legislation aims to align the reporting standards with the Australian equivalents to International Financial Reporting Standards (AIFRS), thereby enhancing the quality and comparability of financial data submitted to APRA. The objective of these instruments is to implement APRA's proposals for a more efficient reporting framework that facilitates better analysis of the financial performance of insurers. The new standards, which took effect from the date of their registration on the Federal Register of Legal Instruments, replaced existing standards and introduced new requirements to collect quarterly and annual data under the revised prudential framework.
Scope and Application
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 apply to financial sector entities, particularly general insurers, and govern the reporting of financial and accounting data to the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001. These instruments establish new reporting standards that align prudential reporting with Australian equivalents to International Financial Reporting Standards, aiming to simplify the reporting process and enhance APRA's analysis of the financial performance of general insurers. The reporting standards cover a range of areas including minimum capital requirements, determination of capital base, investments, derivative activity, and supplementary reporting information. The scope of these determinations is national, as they are enacted under Commonwealth legislation, and apply to all entities subject to the FSCOD Act within Australia. Certain exclusions or exemptions are not explicitly stated in the explanatory statement, but the primary focus is on updating and standardising the data collection processes for improved regulatory oversight and analysis. These determinations also have the potential to be extended or restricted through subordinate instruments, although no such provisions are detailed in the explanatory statement.
Key Provisions
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010, made under the Financial Sector (Collection of Data) Act 2001 (FCSOD Act), introduces new reporting standards for financial sector entities, particularly focusing on general insurers. These standards are designed to align the reporting of financial and accounting data with the Australian equivalents to International Financial Reporting Standards (AIFRS). The primary reporting standards introduced include GRS 110.0 Minimum Capital Requirement, GRS 120.0 Determination of Capital Base, GRS 140 Investments, GRS 160.0 Derivative Activity and Risk Charge, GRS 170.1 Maximum Event Retention and Risk Charge for Lenders Mortgage Insurers, GRS 210 Insurance Risk Charge, GRS 300.0 Statement of Financial Position, GRS 301.0 Reinsurance Assets and Risk Charge, GRS 310 Revenue, Expenses and Financial Performance, GRS 400 Supplementary Reporting Information, and GRS 900.0 Transitional Arrangements 2010. These standards aim to enhance APRA's analysis of the financial performance of general insurers by simplifying the prudential reporting process and introducing minor refinements.
Under these determinations, financial sector entities, particularly general insurers, are obligated to comply with the new reporting standards. This includes aligning their financial and accounting data with AIFRS and submitting additional reconciling data items for the first submission of quarterly and annual returns in accordance with GRS 900.0 Transitional Arrangements 2010. The collection of data under these new standards will commence from the first reporting period ending on or after the date of registration on the Federal Register of Legal Instruments. The new standards replace existing reporting requirements and revoke certain previously applicable standards such as GRS 320.0 (2008) Reconciliation of Annual Disclosure.
Failure to comply with these reporting standards may result in various consequences. While specific penalties are not detailed in the explanatory statement, non-compliance with reporting requirements under the FCSOD Act can generally lead to enforcement actions by APRA, which may include fines, legal proceedings, and other regulatory measures. The severity of the consequences will depend on the nature and extent of the non-compliance, and the potential for civil or criminal liability may arise in cases of deliberate or reckless disregard for the reporting standards.
Overall, the determinations serve to modernise and streamline the prudential reporting framework for general insurers, ensuring that APRA receives accurate and relevant financial data to effectively monitor and regulate the financial sector. The changes are aimed at enhancing the quality of data available to APRA, thereby improving its regulatory oversight and risk assessment capabilities.