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 enacted to streamline and enhance the prudential reporting requirements for the general insurance sector in Australia. These determinations were introduced under the authority of the Financial Sector (Collection of Data) Act 2001, and the purpose is to replace existing reporting standards with new ones that align more closely with the Australian equivalents to International Financial Reporting Standards (AIFRS). The Australian Prudential Regulation Authority (APRA) initiated this reform following consultations with the industry, aiming to simplify reporting processes while improving the quality and comparability of financial data submitted to APRA. The determinations establish new reporting standards for various aspects of insurance business, including capital requirements, investments, and financial performance, and they also revoke certain outdated reporting standards to ensure a coherent and up-to-date regulatory framework.
Scope and Application
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 applies to financial sector entities, specifically general insurers, under the purview of the Financial Sector (Collection of Data) Act 2001 (FSCOD Act). The Australian Prudential Regulation Authority (APRA) has the authority to determine these reporting standards, which are focused on the collection and reporting of financial or accounting data and related business information. The standards are designed to facilitate the simplification of prudential reporting and to align the reporting requirements more closely with the Australian equivalents to International Financial Reporting Standards (AIFRS). This legislation affects entities within the Commonwealth of Australia, as APRA is the regulatory body operating under federal jurisdiction. The new standards replace existing ones and introduce new requirements that commence from the date of registration on the Federal Register of Legal Instruments, with the alignment process starting from the first reporting period ending after this registration date. Certain transitional arrangements are also included to assist with the data reconciliation between the old and new reporting frameworks. Notably, Reporting Standard GRS 320.0 (2008) has been revoked, streamlining the reporting obligations for the affected entities.
Key Provisions
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 (the Determination) sets out eleven new reporting standards and revokes one existing reporting standard, in line with the Financial Sector (Collection of Data) Act 2001 (the FSCOD Act). These standards relate to the reporting of financial and accounting data by financial sector entities, particularly general insurers, to the Australian Prudential Regulation Authority (APRA). Section 13(1)(a) of the FSCOD Act allows APRA to determine reporting standards by written determination, and section 15 of the same Act empowers APRA to declare when these standards take effect. The Act also provides for the revocation of such standards, aligning with subsection 33(3) of the Acts Interpretation Act 1901.
The new reporting standards introduced by the Determination 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 replace the previous reporting requirements and aim to simplify and align the reporting framework with the Australian equivalents to International Financial Reporting Standards (AIFRS). The Determination also revokes the reporting standard GRS 320.0 (2008) Reconciliation of Annual Disclosure, which previously required the reconciliation of annual disclosure data.
Financial sector entities, particularly general insurers, are obligated to comply with the new reporting standards set forth in the Determination. These entities must submit quarterly and annual reports as required under the new prudential framework, beginning with the first reporting period ending on or after the date of registration on the Federal Register of Legal Instruments. The standards mandate the inclusion of additional reconciling data items in the initial quarterly and annual submissions to facilitate a comparison and reconciliation of key reporting items between the old and new reporting bases, as outlined in GRS 900.0 Transitional Arrangements 2010.
Failure to comply with the reporting standards outlined in the Determination may result in civil or criminal consequences, depending on the nature and severity of the breach. While the Determination does not specify exact penalties, breaches of the FSCOD Act generally attract significant fines. For example, under section 12AB of the Crimes Act 1914, individuals who are found guilty of civil penalty provisions in the FSCOD Act may face penalties of up to $210,000 for individuals and $1,050,000 for bodies corporate. Additionally, section 13AD of the same Act provides for criminal penalties, including fines of up to $210,000 for individuals and $1,050,000 for bodies corporate, and potential imprisonment for up to five years for serious or repeated breaches. The exact penalties for non-compliance with the specific provisions in the Determination would be determined based on the context and severity of the breach.