Financial Sector (Collection of Data) (reporting standard) determination No. 9 of 2011 - GRS 302.0_G (2011) - Statement of Financial Position by Region (Level 2 Insurance Group)

Financial Sector (Collection of Data) (reporting standard) determination
Nos. 3 to 10 of 2011
 

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 FSCOD 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 declare a 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

The prudential framework for the supervision of general insurance groups domiciled in Australia has been in effect since mid 2009.  The framework comprises three prudential standards and streamlined reporting requirements.  The objective of the framework is to ensure that general insurance groups are financially sound and that financial and operational interrelationships within the group do not compromise the financial position of any APRA-authorised members of the group.

In May 2011, APRA released the discussion paper titled Refinements to the prudential framework for general insurance groups.  APRA proposed a number of refinements to the prudential and reporting framework for general insurance groups.  The refinements to the prudential framework address minor issues identified since the implementation of the prudential framework for the supervision of general insurance groups.  Refinements to the reporting framework align aspects of general insurance group reporting with the reporting framework for APRA-authorised general insurers that was implemented in July 2010.  These refinements also provide clarifications to the reporting forms and instructions to address minor issues identified since the implementation of general insurance group reporting.

The refinements reflected in the final prudential and reporting standards are substantially consistent with APRA’s proposals in the May 2011 discussion paper.  Some minor amendments have been made as a result of feedback received in submissions on the May 2011 discussion paper.

2. Purpose of the instruments

The changes to APRA’s general insurance group reporting framework required the introduction of 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. 3 to 10 of 2011 will revoke the following reporting standards with effect on and from the date of registration on the Federal Register of Legal Instruments:

• Reporting Standard GRS 110.0_G Minimum Capital Requirement made on 21 August 2009;
• Reporting Standard GRS 120.0_G Determination of Capital Base made on 21 August 2009;
• Reporting Standard GRS 210.0_G Outstanding Claims Liability: Insurance Risk Charge made on 21 August 2009;
• Reporting Standard GRS 210.1_G Premiums Liabilities: Insurance Risk Charge made on 21 August 2009;
• Reporting Standard GRS 300.0_G Statement of Financial Position made on 21 August 2009;
• Reporting Standard GRS 301.0_G Reinsurance Assets and Risk Charge made on 21 August 2009;
• Reporting Standard GRS 302.0_G Statement of Financial Position by Region made on 21 August 2009; and
• Reporting Standard GRS 310_G Income Statement made on 21 August 2009;

Additionally, Financial Sector (Collection of Data) (reporting standard) determination Nos. 3 to 10 of 2011 determine the following reporting standards with effect on and from the date of registration on the Federal Register of Legal Instruments:

• Reporting Standard GRS 110.0_G Minimum Capital Requirement (Level 2 Insurance Group);
• Reporting Standard GRS 120.0_G Determination of Capital Base (Level 2 Insurance Group);
• Reporting Standard GRS 210.0_G Outstanding Claims Liability: Insurance Risk Charge (Level 2 Insurance Group);
• Reporting Standard GRS 210.1_G Premiums Liabilities: Insurance Risk Charge (Level 2 Insurance Group);
• Reporting Standard GRS 300.0_G Statement of Financial Position (Level 2 Insurance Group);
• Reporting Standard GRS 301.0_G Reinsurance Assets and Risk Charge (Level 2 Insurance Group);
• Reporting Standard GRS 302.0_G Statement of Financial Position by Region (Level 2 Insurance Group); and
• Reporting Standard GRS 310_G Income Statement (Level 2 Insurance Group);

3.              Operation of the instruments

Eight revised reporting standards and associated reporting forms will be issued under the FSCOD Act.  These reporting standards enable the reporting requirements of the revised reporting framework to take effect.  The revised reporting framework aligns aspects of general insurance group reporting with the reporting framework for APRA-authorised general insurers that was implemented in July 2010.

The collection of half-yearly and annual data under the new general insurance prudential reporting requirements will commence for reporting periods beginning from 1 July 2011. 

Financial Sector (Collection of Data) (reporting standard) determination Nos. 3 to 10 of 2011:

The changes to the reporting requirements comprise:

• Aligning the general insurance group reporting framework to the reporting framework for APRA-authorised general insurers, by:
  • modifying the treatment of deferred reinsurance expense;
  • modifying the treatment of bound but not incepted business and inwards proportional reinsurance business;
  • deleting the concept of expected reinsurance recoveries on premiums liabilities;
  • requiring the reporting of deferred levies and charges, current tax assets and commission expense; and
  • modifying the reporting of the breakdown of net claims expense;

• Splitting the insurance liability form into two forms – one to report  Australia by class of business and the other Australia by region to reduce ambiguity when reporting Australian business under a reporting adjustment; and

• A number of minor amendments to the reporting forms and instructions to rectify issues identified since the implementation of general insurance group reporting in 2009.

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 from 16 May 2011 to 15 July 2011 on the proposed changes to the current prudential reporting framework for general insurance groups. The consultation process involved the release of a discussion paper outlining the proposed changes, together with draft prudential standards and draft reporting forms and instructions incorporating the proposed changes. APRA received submissions that were generally supportive of the proposals and no material changes have been made to the key proposals. Some minor modifications have been made to address aspects raised in the submissions.

5.   Regulation Impact Statement

A regulation impact statement for the changes described in this Explanatory Statement was not required.