Financial Sector (Collection of Data) (reporting standard) determination Nos. 3-15 of 2009
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Financial Sector (Collection of Data) Act 2001 (the Act), paragraph 13(1)(a)
Acts Interpretation Act 1901, subsection 33(3)
Under paragraph 13(1)(a) of the 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. 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.
Financial Sector (Collection of Data) (reporting standard) determinations Nos. 3-15 of 2009 revoke all existing reporting standards applying to life insurers regulated by APRA and replace them with new reporting standards which are similarly titled.
Under subsection 15(1) of the Act, APRA has determined that Financial Sector
(Collection of Data) (reporting standard) determination Nos. 3-15 of 2009 be effective from the later of 1 October 2009 and the date of registration on the Federal Register of Legislative Instruments.
- Background
This Explanatory Statement explains the changes being made to the life insurance reporting standards and instructions.
Each reporting standard comprises:
- the body of the reporting standard itself (which includes details about when returns under the standards must be lodged with APRA);
- one or more reporting forms which must be completed by general insurers covered by the reporting standard; and
- a set of detailed technical instructions regarding completion of the form.
The reporting standards contain cross references to Prudential Standard LPS 310 Audit and Actuarial Requirements. This prudential standard is being remade as part of a review of the audit requirements for life companies, and as a consequence, the title of the new standard will change. APRA’s intention to makes these changes and those detailed below was foreshadowed in the discussion paper accompanying the package ‘Enhanced supervision of life companies’ released in May 2009. It was stated that given the minor nature of the changes, they would not be released for consultation.
At the same time as amending cross-references, it was decided to also incorporate minor changes to the instructions of four reporting standards to improve clarity of the reporting requirements.
In summary the changes to the reporting standards are minor, and include:
- amendments to allow cross references to the current Prudential Standard LPS 310 Audit and Actuarial Requirements, as well as the new Prudential Standard LPS 310 Audit and Related Matters, which is expected to be released in the third quarter of 2009, with an effective date of July 2010;
- amendments to the instructions to improve clarity of reporting requirements: LRF 100.0 Solvency, LRF 110.0 Capital Adequacy, LRF 220.0 Large Exposures and LRF 400.0 Statement of Policy Liabilities; and
- other minor amendments to the standards to improve clarity and align with reporting standards of other APRA-regulated industries.
The amendments to the instructions are explained further below.
LRF 100.0 Solvency, LRF 110.0 Capital Adequacy
Under item '4.3 Total Admissible Assets' of LRF 100.0 and LRF 110.0, the words "The sum of Total Admissible Assets and Total Inadmissible Amounts (from Item 3.7) should be equal to Total Assets in LRF 300.1" have been inserted. This is to correct the reference to the validation between the sum of admissible and inadmissible assets (in these forms) and total assets in LRF 300.
LRF 220.0 Large Exposures
Under 'Section B Related Party Exposures' the words "Include: All exposures to related parties" have been included to clarify that all exposures to related parties, regardless of the size of the exposure must be reported.
Under 'Part 2: Other Related Parties' the words "Do not report on a look-through basis" have been inserted to remove ambiguity.
These changes have been made to clarify the differences between Section A and B of the instructions.
LRF 400.0 Statement of Policy Liabilities – Section 1.4
Under item '1.4 Sundry Items' the words "This section is to be completed for all products, i.e. including non-participating products" have been inserted.
Additionally, under the same item the words "Where applicable, figures in this section are to be reported on a net of reinsurance basis" have been inserted.
These changes are to clarify that this section is to be completed for all products (although most of the data points will only apply to participating products) and that the section is to be completed on a net of reinsurance basis.
These changes to the reporting instructions and reporting standards do not change the reporting requirements currently in practice, or the audit requirements in the reporting standards.
2. Purpose and operation of the instrument
The purpose of each instrument is to revoke the existing reporting standards applying to life insurers and replace them with corresponding standards which incorporate appropriate adjustments. APRA considered that it would be clearer and more effective to consolidate the necessary changes within new standards. For that reason, APRA decided to revoke and replace affected reporting standards rather than to amend them.
3. Consultation
These changes were foreshadowed in APRA’s discussion paper ‘Enhanced Supervision of Life Companies’ which was released in May 2009. As the changes were minor APRA did not undertake consultation on the proposed changes.