Insurance exemption determination No. 1 of 2013
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority (APRA)
Insurance Act 1973, section 7
Under subsection 7(1) of the Insurance Act 1973 (the Act), APRA has the power to determine that any or all of certain provisions of the Act do not apply to a person while the determination is in force. Paragraph 7(2)(a) provides that a determination may be expressed to apply to a particular person or a class of persons.
On 31 October 2013, APRA made Insurance Exemption Determination No. 1 of 2013 (the instrument) which exempts a class of persons from certain provisions in sections 49J and 49L of the Act.
The instrument commences on the day it is registered on the Federal Register of Legislative Instruments.
- Background
Section 13 of the Financial Sector (Collection of Data) Act 2001 (FSCOD Act) gives APRA power to determine reporting standards that must be complied with by financial sector entities, including general insurers. Reporting standards may require information of a financial nature or of a more general business nature.
On 20 December 2012, APRA determined a suite of reporting standards applying to general insurers for reporting periods ending on or after 1 January 2013. These reporting standards implemented revised reporting requirements for general insurers as a result of the amendments to the regulatory capital framework for general insurers, known as the LAGIC review. The reporting requirements under these reporting standards include both quarterly and annual reporting requirements.
The FSCOD Act does not specifically address the auditing requirements in relation to reporting documents given under reporting standards. For general insurers, these are provided for in the Act.
In this regard, section 3 of the Act contains a definition of yearly statutory accounts, which is defined to mean, in relation to a body corporate (e.g., a general insurer), the reporting documents that the body corporate is required under section 13 of the FSCOD Act to lodge with APRA in respect of a financial year.
Paragraph 49J(1)(a) of the Act provides that an auditor of a general insurer (that is, an auditor appointed under section 39 of the Act) must audit the yearly statutory accounts. Subsection 49J(3) provides that the auditor must give the general insurer a certificate relating to the yearly statutory accounts, which must contain statements of the auditor's opinion on the matters required by the prudential standards to be dealt with in the certificate. Paragraph 49L(1)(a) provides that a general insurer must lodge such a certificate with APRA.
2. Purpose and operation of the instrument
The reporting standards determined by APRA on 20 December 2012 include a number of annual reporting requirements to which APRA does not intend that auditing requirements under the Act would apply. These are the annual information required under Reporting Standard GRS 400.0 Statement of Risk by Country (GRS 400.0), Reporting Standard GRS 420.0 Premium Revenue by State and Territory of Australia (GRS 420.0) and Reporting Standard GRS 430.0 Claims Expense by State and Territory of Australia (GRS 430.0).
The purpose of the instrument is to:
- exempt the Appointed Auditor from auditing the information required by GRS 400.0, GRS 420.0 and GRS 430.0;
- exempt the general insurer from making arrangements for the auditing of the information required by GRS 400.0, GRS 420.0 and GRS 430.0;
- exempt the Appointed Auditor from giving a certificate in relation to the information required by GRS 400.0, GRS 420.0 and GRS 430.0; and
- exempt the general insurer from lodging a certificate in relation to the information required by GRS 400.0, GRS 420.0 and GRS 430.0.
The instrument will operate such that the information required by GRS 400.0, GRS 420.0 and GRS 430.0 will not be subject to audit review by the Appointed Auditor. The information collected under these reporting standards is statistical in nature and APRA is of the view that it does not require review by audit. Having this information outside of scope of the audit review is likely to reduce, although by an immaterial amount, relative to total audit fees, for general insurers.
3. Consultation
APRA undertook consultation on its proposed reporting standards during 2012. This included:
- June 2012 discussion paper ‘Review of capital standards for general insurers and life insurers – proposed revisions to reporting requirements’, draft versions of reporting forms and instructions, reporting standards and capital adequacy calculation workbooks and instructions; and
- August 2012 letter to insurers ‘Additional proposed changes to the reporting standards’.
APRA released in October 2012 the response paper ‘Review of capital standards for general insurers and life insurers – reporting requirements’ that set out the final versions of all forms and instructions and reporting standards.
APRA considered formal and informal feedback from industry in relation to the reporting requirements, including the audit scope. This feedback has been taken into consideration when deciding which information would be excluded from the audit review.
The instrument is minor in nature and does not substantially alter existing audit arrangements.
4. Regulation Impact Statement
The Office of Best Practice Regulation has advised that a Regulation Impact Statement is not required for this legislative instrument.
5. Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
A Statement of compatibility prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 is provided at Attachment A to this Explanatory Statement.
Attachment A
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Insurance exemption determination No. 1 of 2013
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (HRPS Act).
Overview of the Legislative Instrument
This Legislative Instrument excludes three reporting standards for general insurers that were made under the Financial Sector (Collection of Data) Act 2001 from the scope of the review of the yearly statutory accounts that is required to be completed by the Appointed Auditor of a general insurer.
Human rights implications
APRA has assessed this Legislative Instrument and is of the view that it does not engage any of the applicable rights or freedoms recognised or declared in the international instruments listed in section 3 of the HRPS Act. Accordingly, in APRA’s assessment, the instrument is compatible with human rights.
Conclusion
This Legislative Instrument is compatible with human rights because it does not raise any human rights issues.