Life insurance (prudential standard) determination No.16 of 2007
EXPLANATORY STATEMENT
Prepared by the Australian Prudential Regulation Authority
Life Insurance Act 1995, paragraph 230A(1)(a)
Under paragraph 230A(1)(a) of the Life Insurance Act 1995 (Life Act), APRA has the power to determine (in writing) standards in relation to prudential matters to be complied with by all life companies, including friendly societies.
Life insurance (prudential standard) determination No.16 of 2007 determines Prudential Standard LPS 350 Contract Classification for the Purpose of Regulatory Reporting to APRA (LPS 350) to take effect from 1 January 2008.
1. Background
From 1 January 2008 APRA will collect data for life companies (including friendly societies) under the Financial Sector (Collection of Data) Act 2001 (FSCOD Act) rather than the Life Insurance Act 1995 (Life Act).
In 2001 the Government enacted the FSCOD Act to provide APRA with general powers to collect data across all industries. The FSCOD Act enables APRA to determine reporting standards that require regulated institutions to provide information about their businesses and activities. The life insurance industry is the final APRA-regulated industry to be brought under the umbrella of the FSCOD Act. Once these new reporting standards are determined, the previous data collection provisions of the Life Act will no longer have effect. Specifically, sections 82, 117, 118, 121, 243 and 244 of the Life Act will no longer have effect. (See section 15 of the FSCOD Act and Financial Sector (Collection of Data – Consequential & Transitional Provisions) Act 2001 schedule 2 item 75.
Prudential Rules No 49 - Contract Classification for the purpose of regulatory reporting to APRA (PR 49) was established under these sections of the Life Act that will no longer have effect. Therefore PR 49 will no longer have effect.[1] Nonetheless the provisions of PR 49 are still important in defining how contracts must be classified for reporting to APRA and for the purposes of the annual actuarial investigation of the financial investigation of a life company. Therefore, APRA is replacing PR 49 with LPS 350. LPS 350 reproduces the provisions of PR 49.
2. Outline of the Determination
APRA is determining a new prudential standard, LPS 350. LPS 350 replaces PR 49. The provisions of the Life PR 49 are re-created in LPS 350. LPS 350 will take effect from 1 January 2008.
3. Consultation
APRA consulted from 12 April to 13 June 2007 with life companies and industry representative bodies on its proposed new data collection framework. The consultation process involved the release of draft reporting standards, forms and instructions, along with a discussion paper outlining the proposed changes. Eighteen responses were received from life companies and industry bodies. These responses represented the views of the majority of industry participants.
[1] APRA is also revoking PR 49, to avoid doubt. See APRA’s Life insurance (prudential rules) determination No.2 of December 2007.