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, made under the authority of the Financial Sector (Collection of Data) Act 2001, aims to reform the prudential reporting standards for general insurers in Australia. Enacted by the Australian Prudential Regulation Authority (APRA), these determinations address the need for simplified and more refined reporting requirements that better align with Australian International Financial Reporting Standards (AIFRS), thereby enhancing APRA's analysis of the financial performance of insurers. The instruments replace existing reporting standards with new and amended standards that reflect APRA's proposals, which were developed following consultations with the industry to streamline and improve the reporting framework. The policy objective is to ensure that financial sector entities, particularly general insurers, comply with updated reporting standards that facilitate more effective oversight and regulation by APRA.
Scope and Application
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, applies to financial sector entities, specifically general insurers, within Australia. These entities must comply with the newly established reporting standards that align the balance sheet and income statement with Australian equivalents to International Financial Reporting Standards. The determinations aim to simplify prudential reporting to the Australian Prudential Regulation Authority (APRA) and enhance APRA's analysis of the financial performance of general insurers. The new reporting standards include eleven revised standards and transitional arrangements, with certain older standards being revoked. The new standards commence on the date of registration on the Federal Register of Legal Instruments and require insurers to submit additional reconciling data items to facilitate the transition to the new reporting framework. The Act applies nationally across Australia, with APRA having the authority to consult with industry, as evidenced by the consultation process from December 2009 to February 2010, which involved the release of discussion papers and quantitative impact studies, resulting in generally supportive submissions from the industry.
Key Provisions
The Financial Sector (Collection of Data) (reporting standard) determinations Nos. 2 to 13 of 2010 establish new reporting standards that financial sector entities, particularly general insurers, must comply with under the Financial Sector (Collection of Data) Act 2001 (FCSOD Act). These determinations replace existing reporting standards with new ones that align more closely with Australian equivalents to International Financial Reporting Standards (AIFRS). This alignment aims to simplify the reporting process and improve the quality of data collected by the Australian Prudential Regulation Authority (APRA) (sections 2 and 3). The new reporting standards cover various aspects, including minimum capital requirements, determination of capital base, investments, derivative activity, and supplementary reporting information (section 2).
These determinations impose specific obligations on financial sector entities, requiring them to report financial and accounting data in accordance with the new standards. For example, entities must provide detailed information about their balance sheet, income statement, investments, and reinsurance assets. The new standards also require entities to submit additional reconciling data items to facilitate a smooth transition from the old reporting framework to the new one (sections 2 and 3). This includes detailed submissions under Reporting Standard GRS 900.0 Transitional Arrangements 2010 (GRS 900.0) to help APRA reconcile key reporting items under the old and new frameworks (section 3).
Failure to comply with the new reporting standards could result in penalties or other consequences. Although the determinations themselves do not explicitly outline penalties, non-compliance with the FCSOD Act generally may lead to enforcement actions by APRA. These could include financial penalties, legal action, or other regulatory measures. The maximum penalties for breaches of the FCSOD Act can be significant, reflecting the importance of accurate and timely reporting to the regulator (section 13(1)(a) FCSOD Act). Furthermore, ongoing non-compliance could also affect an entity's standing and operations within the financial sector, potentially leading to further regulatory scrutiny or sanctions.
The determinations also include the revocation of an older reporting standard, GRS 320.0 (2008) Reconciliation of Annual Disclosure, which was previously required but is no longer necessary under the new framework. This change streamlines the reporting requirements and reduces the burden on financial sector entities (section 3). APRA consulted with the industry from 3 December 2009 to 12 February 2010, receiving generally supportive feedback from industry stakeholders. This consultation process involved the release of a discussion paper, draft standards, and a quantitative impact study, and resulted in 11 written responses and 45 completed impact studies (section 4). APRA issued a response paper on 23 July 2010, detailing the outcomes of the consultation process.