Insurance (exemption) determination No. 2 of 2005 - Audit requirements applying to certain yearly statutory accounts under GRS 170.1

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Legislation au F2005L03602 Not in force Legislative Instrument

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Insurance (exemption) determination No. 2 of 2005 – audit requirements applying to certain yearly statutory accounts under GRS 170.1

EXPLANATORY STATEMENT

Issued by the authority of the Australian Prudential Regulation Authority (APRA)

Insurance Act 1973

Subsection 7(1) of the Insurance Act 1973 (the Insurance Act) provides that APRA may determine that all or specified provisions of the Insurance 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.  Subsection 7(3) provides that such a determination must be published in the Gazette and, upon publication in the Gazette, has effect according to its terms.  (However, where a subsection 7(1) determination applies to a class of persons, as the present one does, it will be a legislative instrument within the meaning of the Legislative Instruments Act 2003 (the Legislative Instruments Act), and therefore be subject to the requirement to be registered on the Federal Register of Legislative Instruments under that Act.  The effect of s 56 of the Legislative Instruments Act is that registration will effectively satisfy the obligation to gazette the determination.)

Legislative background

Section 13 of the Financial Sector (Collection of Data) Act 2001 (the 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. 

 

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 Insurance Act. 

 

In this regard, section 3 of the Insurance 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 Insurance Act provides that an auditor of a general insurer (that is, an auditor approved by APRA under s 40 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.

 

Background to Insurance Exemption Determination No. 1 of 2005

On 21 June 2005, APRA determined a suite of 28 reporting standards applying to general insurers. They contained a number annual reporting requirements in relation to which APRA did not intend that auditing requirements under the Insurance Act would apply. 

These were, broadly: (1) annual reporting documents required in respect of a consolidated insurance group (as distinct from annual reports required from a stand-alone insurer); and (2) annual reporting documents required under Reporting Standards GRS 400.0 (2005), GRS 420.0 (2005), GRS 420.0 (2005), GRS 430.0 (2005), GRS 440.0 (2005) and GRS 450.0 (2005) (made under Financial Sector (Collection of Data) Determinations 23 to 28 of 2005, respectively).

Accordingly, on 27 July 2005, APRA made Insurance Exemption Determination No. 1 of 2005, which provided that those annual reporting documents, required from general insurers under reporting standards made under s 13 of the FSCOD Act, were not required to be audited, and an audit certificate is not required to be provided or lodged in relation to them. 

 

APRA had not previously required regulated general insures to undertake an audit of returns prepared on a consolidated group basis, and Insurance Exemption Determination No. 1 of 2005 effectively formalised this position.

 

The need for Insurance (exemption) determination No. 2 of 2005

 

Since the making of Insurance Exemption Determination No. 1 of 2005, APRA has made an additional reporting standard (under s 13 of the FSCOD Act) in relation to general insurers, namely Reporting Standard GRS 170.1 (determined under Financial Sector (Collection of Data) determination No. 106 of 2005).

 

Reporting Standard GRS 170.1 applies to general insurers that are lenders mortgage insurers (LMIs). 

 

Like the reporting standards made in relation to general insurers earlier in the year, it contains an annual reporting requirement in respect of a Consolidated insurance group of an LMI (in addition to reporting requirements applying on a stand-alone or Licensed insurer basis).

 

Reporting Standard GRS 170.1 was made after Insurance Exemption Determination No. 1 of 2005, and that exemption determination does not apply to it.  Therefore it is necessary for APRA to make an exemption determination specifically in relation to the reporting requirement for a Consolidated insurance group in GRS 170.1.  That is the purpose of Insurance (exemption) determination No. 2 of 2005.

 

The Determination

 

Insurance (exemption) determination No. 2 of 2005 does the following:

 

  • it exempts the approved auditor of a general insurer from the requirement in paragraph 49J(1)(a) of the Insurance Act to audit any annual information in relation to a Consolidated insurance group provided under Reporting Standard GRS 170.1;

 

  • it exempts a general insurer from the requirement in subsection 49J(2) of the Insurance Act to make arrangements for the auditing of any annual information in relation to a Consolidated insurance group provided under Reporting Standard GRS 170.1;

 

  • it exempts the approved auditor of a general insurer from the requirement in subsection 49J(3) of the Insurance Act to give a certificate in relation to any annual information concerning a Consolidated insurance group provided under Reporting Standard GRS 170.1; and

 

  • it exempts a general insurer from the requirement in paragraph 49L(1)(a) of the Insurance Act to lodge a certificate in relation to any annual information concerning a Consolidated insurance group provided under Reporting Standard GRS 170.1.

 

Consultation

 

In March 2005, APRA wrote to all general insurers and advised that: (1) APRA was proposing to bring each of the reporting standards in the 100, 200 and 300 series into line with the then current reporting arrangements by formalising the requirement to lodge an annual reporting form; and (2) APRA would be excluding the annual reports in the 400 series from the auditing and auditor’s certificate requirements in the Insurance Act. 

APRA received seven submissions in response to the consultation letter, all of which expressed no objection to the proposed changes.

APRA did not consult on the exclusion of the auditing and auditor’s certificate obligations in relation to the annual reporting documents relating to Consolidated insurance groups.  However, prior to the making of Financial Sector (Collection of Data) Determinations Nos. 1 to 28 of 2005, there was no formal obligation to provide annual reporting documents under the previous reporting standards applying to general insurers.  Annual reporting documents relating to Consolidated insurance groups were provided informally, but they were not audited.  Insofar as the present exemption determination exempts insurers and auditors from having to audit the annual reporting documents relating to Consolidated insurance groups it maintains the status quo by relieving insurers of the burden of having to arrange for the auditing of these accounts.

Overview

The Insurance (exemption) determination No. 2 of 2005 was introduced by the Australian Prudential Regulation Authority (APRA) under the authority granted by the Insurance Act 1973. This determination aims to address the need for specific audit exemptions concerning annual statutory accounts under Reporting Standard GRS 170.1 for general insurers who are also lenders mortgage insurers (LMIs). The Insurance Act 1973, which regulates the insurance industry in Australia, allows APRA to determine exemptions from certain provisions of the Act. The purpose of this particular exemption determination is to exclude the requirement for auditing and the lodging of audit certificates for annual information related to consolidated insurance groups, as stipulated under GRS 170.1, thereby aligning with previous practices where such audits were not mandatory. Following the consultation with general insurers in March 2005, where APRA proposed changes to reporting standards and sought feedback on the exemption from auditing for specific annual reports, APRA determined that no objections were raised regarding the exemption of audit requirements for consolidated insurance group reports under GRS 170.1. This determination maintains the status quo by exempting insurers and their auditors from the obligation to audit these specific annual reports, continuing the previous informal approach.

Scope and Application

The Insurance (exemption) determination No. 2 of 2005 applies to general insurers, specifically those that are also lenders mortgage insurers (LMIs), and their approved auditors, who are otherwise subject to the Insurance Act 1973. The determination exempts these entities from certain audit requirements under the Insurance Act in relation to their yearly statutory accounts, particularly those required to be lodged under the reporting standard GRS 170.1. This exemption applies to the annual information concerning a Consolidated insurance group of these insurers. The scope of this determination is limited to the Commonwealth jurisdiction, and it was made under the authority of the Australian Prudential Regulation Authority (APRA) as per the powers granted under the Insurance Act and the Financial Sector (Collection of Data) Act 2001. The determination does not introduce any new exclusions beyond what was informally in place, effectively maintaining the status quo by exempting insurers from the burden of auditing certain annual reports. The determination extends its application through the legislative instruments established under the Legislative Instruments Act 2003, which mandates registration on the Federal Register of Legislative Instruments for legislative instruments.

Key Provisions

The Insurance (Exemption) Determination No. 2 of 2005 primarily exempts certain types of annual information provided by general insurers under specific reporting standards from the auditing and certificate requirements outlined in the Insurance Act. This determination applies to annual information related to a consolidated insurance group provided under Reporting Standard GRS 170.1, which applies to general insurers that are also lenders and mortgage insurers (LMIs). In plain terms, this means that for LMIs, the yearly statutory accounts for their consolidated insurance groups do not need to be audited by an approved auditor, and neither the auditor nor the insurer is required to provide or lodge a certificate in relation to these accounts (sections 49J and 49L). Under the obligations set out by this determination, approved auditors of general insurers are exempt from auditing the annual information pertaining to a consolidated insurance group provided under GRS 170.1. Additionally, general insurers are not required to arrange for the auditing of this information, and neither the auditor nor the insurer must give or lodge a certificate in relation to these accounts. This exemption aligns with the previous practice, where such annual reports were not formally audited. The determination maintains the status quo by not imposing the burden of auditing these accounts on insurers and auditors, effectively continuing a precedent set before the formalisation of these reporting standards. Any breach of the requirements set out in the Insurance Act, from which this determination exempts certain reports, could potentially lead to civil or criminal penalties. However, since the determination itself does not create new obligations but rather exempts from existing ones, its breach does not introduce additional penalties. It is important to note that while the determination exempts certain annual reports from the auditing requirements, it does not exempt insurers from their general obligations under the Insurance Act or other applicable laws. Any failure to comply with other requirements not affected by this determination could still lead to penalties under those specific provisions. In conclusion, Insurance (Exemption) Determination No. 2 of 2005 serves to exempt specific annual information related to consolidated insurance groups of LMIs from the auditing and certificate requirements under the Insurance Act. This exemption eases the regulatory burden on general insurers and their auditors by maintaining the precedent of not auditing these particular reports, thereby aligning with prior practices while formalising the exemption through legislative means.

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Insurance Law
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Regulation
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Reporting & Disclosure Obligations
Exemptions & Exclusions
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.