Life Insurance (prudential rules) determination No. 1 of 2006 - Prudential Rules No. 26 - Collection of Statistics (16/12/2005) Variation (25/01/2006)

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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244 do not appear in some published compilations of the Act, they will continue to form part of the Act until they are repealed by Items 57, 72 and 75 of Schedule 2 to the Financial Sector (Collection of Data – Consequential and Transitional Provisions) Act 2001.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.

 

Overview

The Life Insurance (Prudential Rules) Determination No. 1 of 2006 was enacted to address discrepancies between the requirements of the Life Insurance Act 1995 and the Actuarial Standards established by the Life Insurance Actuarial Standards Board. This Determination was issued by the Australian Prudential Regulation Authority (APRA) under the authority conferred by the Life Insurance Act 1995. The policy objective of the Determination is to ensure consistency and alignment between the forms prescribed under the prudential rules and the corresponding Actuarial Standards, thereby enhancing the reliability and comparability of financial data reported by life insurance companies. The Determination modifies the forms included in the Prudential Rules No. 26 to omit certain elements that are no longer applicable and to introduce revised items that better reflect the current actuarial standards. This change aims to streamline the data collection process while maintaining the integrity of the financial reporting requirements for life insurance companies.

Scope and Application

The Life Insurance (Prudential Rules) Determination No. 1 of 2006 is an instrument made under the Life Insurance Act 1995 by the Australian Prudential Regulation Authority (APRA) with the objective of updating the prudential rules concerning the collection of statistics by life insurance companies. This Determination applies to all life companies registered under the Life Insurance Act 1995, excluding friendly societies, and mandates the collection of specified statistical data in a manner consistent with the Actuarial Standards set by the Life Insurance Actuarial Standards Board. The changes introduced by this Determination are primarily technical, aiming to ensure the forms used for reporting solvency and capital adequacy requirements align with the current actuarial standards, thus maintaining regulatory consistency. The Determination comes into effect upon its registration on the Federal Register of Legislative Instruments and applies to reporting periods ending on or after 31 December 2005. Notably, while the alteration to the prudential rules is minor and does not require extensive consultation, it ensures that life companies adhere to the updated actuarial standards, facilitating accurate and reliable statistical reporting.

Key Provisions

The Life Insurance (Prudential Rules) Determination No. 1 of 2006 primarily varies Prudential Rules No. 26 (PR 26), which pertains to the collection of statistics by life insurance companies registered under the Life Insurance Act 1995 (sections 117 and 244). This determination, issued by the Australian Prudential Regulation Authority (APRA) under section 252(1) of the Act, includes modifications to two specific forms (B.3 and C.3) in Schedule 3 of PR 26. These changes aim to align the statistical reporting requirements with the corresponding Actuarial Standards (AS 2.04 and AS 3.04) issued by the Life Insurance Actuarial Standards Board. Specifically, the Determination omits the outdated solvency requirement in Form B.3 and reinstates a necessary solvency requirement in Form C.3, ensuring consistency with the latest actuarial standards. Under this Act, life insurance companies are required to collect and report statistics as prescribed by the prudential rules. The obligations include preparing an annual statistical return relating to policy liabilities and policy movements for each statutory fund of the company (section 117). Additionally, APRA is mandated to collect these statistics as prescribed by the prudential rules, in the specified time and manner (section 244). The updated forms under PR 26 now reflect the most current actuarial standards, ensuring that the data collected aligns with industry best practices and regulatory expectations. The Act does not explicitly detail offences or penalties for non-compliance with the prudential rules in the context of this determination. However, the Life Insurance Act 1995 generally provides for various civil and criminal penalties for breaches of its provisions. Offences under the Act can result in substantial fines and, in severe cases, imprisonment. For instance, section 252(3) of the Act states that a person who contravenes a prudential rule is liable to a penalty of up to $100,000 for a corporation, and the same penalty applies for individuals who are officers of the corporation and are responsible for the contravention. Non-compliance with these rules may also lead to the revocation of the company's registration, which can severely impact its ability to operate within the Australian market.

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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.