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 introduced under the authority of the Financial Sector (Collection of Data) Act 2001, enacted by the Parliament of Australia. These determinations were made by the Australian Prudential Regulation Authority (APRA) to address the need for streamlined and enhanced prudential reporting requirements for the general insurance sector. The objective of these instruments was to simplify and refine the reporting standards for financial and accounting data, thereby facilitating more effective analysis of the financial performance of general insurers by APRA. In line with the Act, APRA consulted with the industry from December 2009 to February 2010, resulting in the replacement of existing reporting standards with new ones that align more closely with Australian equivalents to International Financial Reporting Standards (AIFRS). The new standards are designed to take effect from the date of their registration on the Federal Register of Legal Instruments.
Scope and Application
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010, issued by the Australian Prudential Regulation Authority (APRA), applies to financial sector entities, particularly general insurers, under the Financial Sector (Collection of Data) Act 2001 (FCSOD Act). These determinations establish new and amended reporting standards that mandate entities to comply with specified financial or accounting data reporting requirements. The changes align prudential reporting to APRA with Australian equivalents to International Financial Reporting Standards (AIFRS), enhancing APRA's analysis of the financial performance of general insurers. The new standards, which include GRS 110.0 to GRS 400 and GRS 900.0, replace existing standards and will be effective from the date of registration on the Federal Register of Legal Instruments. Notably, GRS 320.0 (2008) Reconciliation of Annual Disclosure has been revoked. These standards cover a broad range of reporting aspects such as capital requirements, investments, derivative activities, and financial position statements, ensuring comprehensive data collection for regulatory oversight.
Key Provisions
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010, under the Financial Sector (Collection of Data) Act 2001 (FCSOD Act), introduce new reporting standards for general insurers to comply with when reporting financial and accounting data to the Australian Prudential Regulation Authority (APRA) (sections 1 to 4). These standards are intended to align with the Australian equivalents to International Financial Reporting Standards (AIFRS) and to simplify prudential reporting processes. APRA has the authority to determine these reporting standards, as outlined in paragraph 13(1)(a) of the FCSOD Act, and can declare when these standards take effect under section 15 of the same Act. The Acts Interpretation Act 1901 further supports APRA’s ability to revoke any such instruments under subsection 33(3).
The obligations under these determinations require general insurers to adopt new reporting standards for various aspects of their financial reporting. This includes standards for minimum capital requirements (GRS 110.0), determination of capital base (GRS 120.0), investments (GRS 140), derivative activity and risk charge (GRS 160.0), maximum event retention and risk charge for lenders mortgage insurers (GRS 170.1), insurance risk charge (GRS 210), statement of financial position (GRS 300.0), reinsurance assets and risk charge (GRS 301.0), revenue, expenses and financial performance (GRS 310), supplementary reporting information (GRS 400), and transitional arrangements for 2010 (GRS 900.0). Moreover, insurers must also submit additional reconciling data items for the first quarterly and annual returns under GRS 900.0 to facilitate APRA’s comparison and reconciliation of key reporting items between the old and new reporting frameworks.
The Financial Sector (Collection of Data) (reporting standard) determination Nos. 2 to 13 of 2010 also revoke the Reporting Standard GRS 320.0 (2008) Reconciliation of Annual Disclosure, which was previously effective from 3 November 2008. This revocation is made under determination No. 13 of 2010, and the changes will take effect from the date of registration on the Federal Register of Legal Instruments. The new standards are designed to take effect from the first reporting period ending on or after this registration date, and insurers must adhere to these new requirements from this point onwards.
Failure to comply with these new reporting standards may result in various consequences. While the determinations do not explicitly detail specific penalties for non-compliance, non-compliance with the FCSOD Act generally can lead to civil and criminal penalties. Civil penalties under the Act can include fines up to $210,000 for individuals and $1,050,000 for bodies corporate, as per the general penalty provisions in the Act. Additionally, criminal penalties, which may include imprisonment, can apply for more serious breaches. APRA may also take enforcement actions, such as issuing infringement notices, imposing administrative penalties, or referring matters to law enforcement agencies for prosecution.