Life Insurance (prudential rules) determination No. 1 of 2006
Prudential Rules No 26 - Collection of Statistics
Explanatory Statement
This statement is issued by the authority of the Australian Prudential Regulation Authority (‘APRA’) under:
- Life Insurance Act 1995, subsection 252(1)
- Acts Interpretation Act 1901, subsection 33(3)
Legislative background
Under subsection 252(1) of the Life Insurance Act 1995 (‘the Act’), APRA has the power to determine (in writing) prudential rules prescribing all matters required or permitted by the Act that must be complied with by all life companies registered under the Act. Such prudential rules are ‘legislative instruments’ within the meaning of the Legislative Instruments Act 2003.
Section 244 of the Act provides that APRA must collect such statistics as are prescribed by the prudential rules, in the time and manner prescribed by the rules. Section 117 of the Act provides that life companies must prepare an additional annual statistical return relating to policy liabilities at the end of the financial year and policy movements during the financial year in respect of each statutory fund of the company. Prudential Rules No. 26 (PR 26) now deals with all of these statistical collections in relation to life companies other than friendly societies.
Although sections 117 and 244 do not appear in some published compilations of the Act, they will continue to form part of the Act until they are repealed by Items 57, 72 and 75 of Schedule 2 to the Financial Sector (Collection of Data – Consequential and Transitional Provisions) Act 2001. The repeal will not occur until APRA makes a reporting standard in relation to life companies under section 13 of the Financial Sector (Collection of Data) Act 2001 and in accordance with section 15 of that Act the reporting standard begins to apply to life companies. Accordingly, for the time being, sections 117 and 244 of the Act remain in effect.
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 vary any such instrument.
The Determination
The purpose of Life Insurance (Prudential Rules) Determination No. 1 of 2006 (‘the Determination’) is to vary the current PR 26 (made under subsection 252(1) of the Act for the purposes of section 244). The Determination will take effect upon registration on the Federal Register of Legislative Instruments.
The variation of PR 26 is necessary in order to achieve consistency between the requirements contained in two of the forms specified in Schedule 3 of PR 26 and the requirements of the corresponding Actuarial Standards made by the Life Insurance Actuarial Standards Board. Therefore this variation:
- omits two of the forms that were included in Schedule 3 of PR 26; and
- inserts two changed forms in place of the omitted forms. These forms are referenced as PR 26, Schedule 3, Forms B.3 and C.3.
Explanation of the Changes
The changes to the forms are as follows:
Form and Item | Comment |
PR 26, Schedule 3, Form B.3 (“Solvency Requirement”) Line (17): “Greater of above amount and the sum of the other liabilities and the total of the Policy Liabilities for all policies”
| This minimum no longer applies. The inserted form omits that line, and then re-defines and re-numbers subsequent items on the form accordingly. The result is the consistency of Form B.3 with Actuarial Standard AS 2.04 Solvency. |
PR 26, Schedule 3, Form C.3 (“Capital Adequacy Requirement”) Line (12): “Greater of above amount and the Solvency Requirement for the statutory fund”
| This minimum continues to apply. The inserted form reinstates that line, and then re-defines and re-numbers subsequent items on the form accordingly. The result is the consistency of Form C.3 with Actuarial Standard AS 3.04 Capital Adequacy. |
As the variation to PR 26 is of a minor nature, facilitates the consistency of the forms with obligations contained in current Actuarial Standards and is unlikely to have a direct, or substantial indirect, effect on business or to restrict competition, consultation under section 17 of the Legislative Instruments Act 2003 was not undertaken.
Implementation
The Determination takes effect from the date it is registered on the Federal Register of Legislative Instruments. The variation to PR 26 will apply for reporting periods ending on or after 31 December 2005, i.e. corresponding to the first full financial reporting periods for which Actuarial Standards AS 2.04 and AS 3.04 apply. However, life insurance companies ordinarily do not have to provide completed Forms B.3 and C.3 in respect of those reporting periods until three months after the end of the reporting period to which they relate. To allow for the orderly transition to International Financial Reporting Standards implemented under Life Insurance (Prudential Rules) Determination No. 4 of 2005, the period for the first data collections has been extended by APRA for a further six weeks.