Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2013

Administered by Department of the Treasury

Legislation au F2013L00376 Not in force Legislative Instrument

Legislation content

Financial Sector (Collection of Data) (reporting standard) determination Nos. 1 to 26 of 2013

EXPLANATORY STATEMENT

Prepared by the Australian Prudential Regulation Authority (APRA)

Financial Sector (Collection of Data) Act 2001, subsections 13(1) and 15(1)
Acts Interpretation Act 1901, subsection 33(3)

Under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (FSCODA), APRA has the power to determine reporting standards, in writing, 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.  Subsection 15(1) of FSCODA provides that APRA may declare a date on and after which reporting standards are 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 and vary any such instrument.

On 20 December 2012, APRA made the following determinations (the instruments):

  1. Financial Sector (Collection of Data) (reporting standard) determination No. 1 of 2013, which makes Reporting Standard GRS 001 Reporting Requirements;
  2. Financial Sector (Collection of Data) (reporting standard) determination No. 2 of 2013, which revokes Reporting Standard GRS 110.0 (2010) Minimum Capital Requirement made on 30 July 2010 and makes a new Reporting Standard GRS 110.1 Prescribed Capital Amount;
  3. Financial Sector (Collection of Data) (reporting standard) determination No. 3 of 2013, which revokes Reporting Standard GRS 120.0 (2010) Determination of Capital Base made on 30 July 2010 and makes a new Reporting Standard GRS 112.0 Determination of Capital Base;
  4. Financial Sector (Collection of Data) (reporting standard) determination No. 7 of 2013, which revokes Reporting Standard GRS 160.0 (2010) Derivative Activity and Risk Charge made on 30 July 2010 and makes a new Reporting Standard GRS 114.2 Derivatives Activity;
  5. Financial Sector (Collection of Data) (reporting standard) determination No. 9 of 2013, which revokes Reporting Standard GRS 140 (2010) Investments made on 17 August 2010 and makes a new Reporting Standard GRS 114.4 Details of Investment Assets;
  6. Financial Sector (Collection of Data) (reporting standard) determination No. 10 of 2013, which revokes Reporting Standard GRS 210 (2010) Insurance Risk Charge made on 30 July 2010 and makes a new Reporting Standard GRS 115.0 Outstanding Claims Liabilities – Insurance Risk Charge;
  7. Financial Sector (Collection of Data) (reporting standard) determination No. 13 of 2013, which revokes Reporting Standard GRS 170.1 (2010) Maximum Event Retention and Risk Charge for Lenders Mortgage Insurers made on 30 July 2010 and makes a new Reporting Standard GRS 116.1 Probable Maximum Loss for LMIs;
  8. Financial Sector (Collection of Data) (reporting standard) determination No. 14 of 2013, which revokes Reporting Standard GRS 150.0 (2008) Asset Exposure Concentrations and Risk Charge made on 16 October 2008 and makes a new Reporting Standard GRS 117.0 Asset Concentration Risk Charge;
  9. Financial Sector (Collection of Data) (reporting standard) determination No. 17 of 2013, which revokes Reporting Standard GRS 310 (2010) Revenue, Expenses and Statement of Financial Performance made on 30 July 2010 and makes a new Reporting Standard GRS 310.0 Income Statement;
  10. Financial Sector (Collection of Data) (reporting standard) determination No. 21 of 2013, which revokes Reporting Standard GRS 400 (2010) Supplementary Reporting Information made on 30 July 2010 and makes a new Reporting Standard GRS 400.0 Statement of Risk by Country; and
  11. Financial Sector (Collection of Data) (reporting standard) determination No. 26 of 2013, which revokes :

(a)   Reporting Standard GRS 170.0 (2008) Concentration Risk Charge made on 16 October 2008; and

(b)   Reporting Standard GRS 900.0 Transitional Arrangements 2010.

The instruments commence on 1 January 2013. The instruments are being registered after this date; however the requirements apply to reporting periods ending no earlier than 28 February 2013. No insurer will be impacted by the retrospective registration as the time for lodging forms with APRA will arise no earlier than 20 business days after 28 February 2013.

On 20 December 2012, APRA made the following determinations that were then varied and re-signed on 12 February 2013 (the instruments):

  1. Financial Sector (Collection of Data) (reporting standard) determination No. 4 of 2013, which makes Reporting Standard GRS 112.3 Related Party Exposures;
  2. Financial Sector (Collection of Data) (reporting standard) determination No. 5 of 2013, which makes Reporting Standard GRS 114.0 Asset Risk Charge;
  3. Financial Sector (Collection of Data) (reporting standard) determination No. 6 of 2013, which makes Reporting Standard GRS 114.1 Assets by Counterparty Grade;
  4. Financial Sector (Collection of Data) (reporting standard) determination No. 8 of 2013, which revokes:

(a)          Reporting Standard GRS 130.0 (2008) Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge made on 16 October 2008;

(b)          Reporting Standard GRS 130.1 (2008) Off Balance Sheet Business – Liquidity Support Facilities Obtained made on 16 October 2008;

(c)          Reporting Standard GRS 130.2 (2008) Off Balance Sheet Business – Charges Granted and Risk Charge made on 16 October 2008;

(d)          Reporting Standard GRS 130.3 (2008) Off Balance Sheet Business – Credit Support Received made on 16 October 2008;

and makes a new Reporting Standard GRS 114.3 Off-balance Sheet Business;

5.             Financial Sector (Collection of Data) (reporting standard) determination No. 11 of 2013, which makes Reporting Standard GRS 115.1 Premiums Liabilities – Insurance Risk Charge;

6.             Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2013, which makes Reporting Standard GRS 116.0 Insurance Concentration Risk Charge;

7.             Financial Sector (Collection of Data) (reporting standard) determination No. 15 of 2013, which makes Reporting Standard GRS 118.0 Operational Risk Charge;

8.             Financial Sector (Collection of Data) (reporting standard) determination No. 16 of 2013, which revokes:

(a)          Reporting Standard GRS 300.0 (2010) Statement of Financial Position made on 30 July 2010; and

(b)          Reporting Standard GRS 301.0 (2010) Reinsurance Assets and Risk Charge made on 30 July 2010,

and makes a new Reporting Standard GRS 300.0 Statement of Financial Position;

9.             Financial Sector (Collection of Data) (reporting standard) determination No. 18 of 2013, which makes Reporting Standard GRS 310.1 Premium Revenue and Reinsurance Expense;

10.         Financial Sector (Collection of Data) (reporting standard) determination No. 19 of 2013, which makes Reporting Standard GRS 310.2 Claims Expense and Reinsurance Recoveries;

11.         Financial Sector (Collection of Data) (reporting standard) determination No. 20 of 2013, which makes Reporting Standard GRS 310.3 Details of Income and Expenses;

12.         Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2013, which makes Reporting Standard GRS 410.0 Movement in Outstanding Claims Liabilities;

13.         Financial Sector (Collection of Data) (reporting standard) determination No. 23 of 2013, which makes Reporting Standard GRS 420.0 Premium Revenue by State and Territory of Australia;

14.         Financial Sector (Collection of Data) (reporting standard) determination No. 24 of 2013, which makes Reporting Standard GRS 430.0 Claims Expense by State and Territory of Australia; and

15.         Financial Sector (Collection of Data) (reporting standard) determination No. 25 of 2013, which makes Reporting Standard GRS 440.0 Claims Development Table.

The instruments commence on 12 February 2013. The instruments are being registered after this date; however the requirements apply to reporting periods ending no earlier than 28 February 2013. No insurer will be impacted by the retrospective re-signing and registration as the time for lodging forms with APRA will arise no earlier than 20 business days after 28 February 2013.

  1.    Background

APRA commenced a review of the regulatory capital framework for general insurers and life companies (LAGIC review) in 2010. The broad aims of the review were to:

  • improve the risk sensitivity and appropriateness of the capital standards in general insurance and life insurance (including friendly societies); and
  • where appropriate, improve the alignment of the capital standards across the industries that APRA supervises.

APRA has made a range of amendments to its prudential framework to give effect to the findings of the review. As a result of the changes, there is a common capital framework for required capital and eligible capital across general insurers and life companies. The minimum capital requirement is known as the Prudential Capital Requirement (PCR). This comprises a prescribed capital amount plus any supervisory adjustment determined by APRA. General insurers must at all times satisfy minimum requirements for the composition of their capital bases and ensure that the capital base exceeds the PCR. 

2.      Purpose and operation of the instruments

The purpose of making the instruments is to introduce new and amended reporting standards and to revoke existing reporting standards in relation to general insurers in order to implement the changes under the LAGIC review.

The implementation of the revised capital framework under LAGIC requires substantive changes to the reporting requirements for both general insurers and life companies. For general insurers, amendments to the methodology for calculating the prescribed capital amount are made. This includes the introduction of an explicit operational risk charge, revisions to the calculation of the asset risk charge, insurance concentration risk charge and asset concentration risk charge. The definitions of capital base and the categories of capital included in the capital base were also revised.

APRA has also taken the opportunity to make improvements to the reporting requirements of general insurers, by implementing a number of changes to enhance the general insurance publications. The timing of submission of annual returns and a small number of technical changes to data submission were also made.

For general insurers, the changes to reporting requirements arising from the LAGIC review are effected through the instruments.

The new reporting standards and associated reporting forms are issued under FSCODA. These 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 1 January 2013.

 

3.      Consultation

APRA undertook consultation on the LAGIC review between May 2010 and October 2012, including four rounds of industry consultation, three technical papers and two quantitative impact studies.

  • In addition to extensive consultation in relation to the prudential requirements, APRA released the following consultation materials in relation to the reporting requirements: June 2012 – Discussion paper ‘Review of capital standards for general insurers and life insurers – proposed revisions to reporting requirements’[1], draft versions of reporting forms and instructions, reporting standards and capital adequacy calculation workbooks and instructions;
  • August 2012 – Letter to insurers ‘Additional proposed changes to the reporting standards’[2]; and
  • October 2012 – Response paper ‘Review of capital standards for general insurers and life insurers – reporting requirements’[3], final versions of all forms and instructions and reporting standards.

APRA has considered both formal and informal feedback from industry throughout the above multi-year process. Submissions received by APRA were broadly supportive of the changes. Issues considered to be significant or to have merit were incorporated into the revised capital framework.

 

4.      Regulation Impact Statement

A Regulation Impact Statement has been prepared and has been lodged as supporting material.

5.      Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

The legislative instruments the subject of this explanatory statement do not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. Accordingly, in APRA’s assessment, these legislative instruments are compatible with human rights.

 

 

[1]  http://www.apra.gov.au/CrossIndustry/Consultations/Pages/LAGIC-Reporting-Requirements-June-2012.aspx

[2]  http://www.apra.gov.au/CrossIndustry/Consultations/Documents/120806-letter-to-industry-LAGIC-proposed-changes-to-reporting-standards.pdf

[3]  http://www.apra.gov.au/lifs/ReportingFramework/Pages/LAGIC-final-reporting-requirements-LI-October-2012.aspx

Overview

The Financial Sector (Collection of Data) (reporting standard) determination Nos. 1 to 26 of 2013 were enacted to implement changes arising from the Life and General Insurance Capital (LAGIC) review conducted by the Australian Prudential Regulation Authority (APRA). The review aimed to improve the risk sensitivity and appropriateness of capital standards in general insurance and life insurance, and to enhance the alignment of capital standards across industries supervised by APRA. This legislative action addresses the need for updated reporting standards in response to the revised capital framework. The determinations revoke existing reporting standards and introduce new ones to align with the changes under the LAGIC review. APRA, as the enacting body, exercised its power under the Financial Sector (Collection of Data) Act 2001 to determine these reporting standards. The policy objective is to ensure that financial sector entities provide accurate and timely data, supporting APRA's regulatory oversight and the overall stability of the financial sector.

Scope and Application

The Financial Sector (Collection of Data) (Reporting Standard) Determination Nos. 1 to 26 of 2013, issued by the Australian Prudential Regulation Authority (APRA), pertain to financial sector entities within Australia. These entities, which include authorised deposit-taking institutions, general insurers, life insurers, and certain other financial institutions, are mandated to comply with new or amended reporting standards concerning financial and accounting data. The scope of these instruments extends to various aspects of financial operations, including capital requirements, investment details, derivative activities, and risk charges. The determinations commenced on dates ranging from 1 January 2013 to 12 February 2013, with requirements applicable from reporting periods ending no earlier than 28 February 2013. APRA has the authority to revoke or vary these instruments, in line with the provisions of the Financial Sector (Collection of Data) Act 2001 and the Acts Interpretation Act 1901. The changes aim to implement the findings of the Life and General Insurance Capital Review (LAGIC review) and enhance the regulatory capital framework, ensuring risk sensitivity and alignment of capital standards across supervised industries. APRA undertook extensive consultation with the industry and considered feedback before issuing these determinations.

Key Provisions

The Financial Sector (Collection of Data) (Reporting Standard) Determinations Nos. 1 to 26 of 2013, issued by the Australian Prudential Regulation Authority (APRA) under the Financial Sector (Collection of Data) Act 2001 (FSCODA), establish new and amended reporting standards for financial entities. These standards, outlined in subsections 13(1) and 15(1) of FSCODA, pertain to the reporting of financial, accounting, and business data. Subsection 13(1)(a) grants APRA the authority to issue these standards, while subsection 15(1) allows for the specification of effective dates. The Acts Interpretation Act 1901, subsection 33(3), further empowers APRA to revoke or vary these standards. These determinations mandate that financial sector entities comply with updated reporting requirements that reflect the outcomes of the Life and General Insurance Capital (LAGIC) review, which aimed to improve the risk sensitivity and appropriateness of capital standards for insurers. For example, Determination No. 2 of 2013 introduces a new Reporting Standard GRS 110.1, which outlines the prescribed capital amount for general insurers. Similarly, Determination No. 13 of 2013 establishes Reporting Standard GRS 116.1 for probable maximum loss for Lenders Mortgage Insurers. These standards are designed to ensure that entities report accurate and relevant financial data, thereby enabling APRA to effectively supervise and regulate the financial sector. Entities subject to these determinations must adhere to the new reporting standards, which include detailed specifications on the types of data to be reported, the format, and the frequency of reporting. This includes the submission of quarterly and annual returns, as well as specific technical changes to data submission processes. For instance, Determination No. 17 of 2013 introduces a new Reporting Standard GRS 310.0 for the income statement, requiring entities to report detailed income and expense data. Failure to comply with these reporting standards can result in regulatory action. While the specific penalties are not detailed within the explanatory statement, breaches of reporting standards under FSCODA generally attract civil or criminal penalties. Civil penalties can include fines, and in severe cases, criminal penalties such as imprisonment may apply. APRA has the authority to impose these penalties where it is determined that an entity has failed to comply with the mandated reporting requirements. APRA's extensive consultation process, which included multiple rounds of industry consultation and the release of detailed discussion papers and response papers, underscores the importance of stakeholder engagement in the development of these standards. The consultation process ensured that the views of industry participants were considered and integrated into the final determinations. The legislation, as evidenced by the Statement of Compatibility, is also deemed to be compatible with human rights, as it does not engage any of the rights or freedoms declared in the international instruments listed under the Human Rights (Parliamentary Scrutiny) Act 2011.

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