Financial Sector (Collection of Data) (reporting standard) determination No. 57 of 2013 - LRS 400.0 - Statement of Policy Liabilities

Link to law: https://www.comlaw.gov.au/Details/F2013L00111

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Financial Sector (Collection of Data) (reporting standard) determination No. 57 of 2013
Reporting Standard LRS 400.0 Statement of Policy Liabilities
Financial Sector (Collection of Data) Act 2001
 
I, Ian Laughlin, delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901:
 
(a)           REVOKE Financial Sector (Collection of Data) (reporting standard) determination No. 12 of 2009, including Reporting Standard LRS 400.0 Statement of Policy Liabilities made under that Determination; and
 
(b)          DETERMINE Reporting Standard LRS 400.0 Statement of Policy Liabilities in the form set out in the Schedule, which applies to the financial sector entities to the extent provided in paragraph 3 of the reporting standard.
 
Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those financial sector entities, and the revoked reporting standard shall cease to apply, on 1 January 2013.
 
This instrument commences on 1 January 2013.
 
Dated: 20 December 2012
 
[Signed]
 
 
Ian Laughlin
Member
 
Interpretation
In this Determination:
APRA means the Australian Prudential Regulation Authority.
financial sector entity has the meaning given in section 5 of the Act.
 
Schedule
 
Reporting Standard LRS 400.0 Statement of Policy Liabilities comprises the 15 pages commencing on the following page.

Reporting Standard LRS 400.0
Statement of Policy Liabilities
Objective of this Reporting Standard
This Reporting Standard sets out the requirements for the provision of information to APRA in relation to a statement of a life company’s policy liabilities.   
It includes Form LRF 400.0 Statement of Policy Liabilities and associated specific instructions and must be read in conjunction with the general instruction guide.
 
Authority
1.             This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (Collection of Data Act).
Purpose
2.             Information collected in Form LRF 400.0 Statement of Policy Liabilities (LRF 400.0) is used by APRA for the purpose of prudential supervision including assessing compliance with capital standards.
Application and commencement
3.             This Reporting Standard applies to all life insurance companies including friendly societies (together referred to as ‘life companies’) registered under the Life Insurance Act 1995 (Life Insurance Act). This Reporting Standard applies for reporting periods ending on or after 1 January 2013.
Information required
4.             A life company must provide APRA with the information required by the Form LRF 400.0 for each reporting period.
5.             The information reported to APRA under this Reporting Standard is not required to be given to policy owners pursuant to section 124 of the Life Insurance Act. It does not constitute a reporting document for the purposes of section 124.
Forms and method of submission
6.             The information required by this Reporting Standard must be given to APRA in electronic format using the ‘Direct to APRA’ application or, where ‘Direct to APRA’ is not available, by a method notified by APRA prior to submission.
Note: The ‘Direct to APRA’ application software may be obtained from APRA.
Reporting periods and due dates
7.             Subject to paragraph 8, a life company must provide the information required by this Reporting Standard in respect of each financial year of the life company on an audited basis.
Note: The annual audited form must be submitted in conjunction with the annual auditor’s report, as required under Prudential Standard LPS 310 Audit and Related Matters (LPS 310).
8.             If, having regard to the particular circumstances of a life company,  APRA  considers it necessary or desirable to obtain information more or less frequently than as provided by paragraph 7, APRA may, by notice in writing, change the reporting periods, or specify reporting periods, for the particular life company.
9.             The information required by this Reporting Standard in respect of a life company must be provided to APRA:
(a)           within the time stated in Reporting Standard LRS 001 Reporting Requirements (LRS 001); or
(b)          in the case of information provided in accordance with paragraph 8, within the time specified by notice in writing.
Quality control
10.         The information provided by a life company under this Reporting Standard must be the product of systems, processes and controls that have been reviewed and tested by the Auditor of the life company. This will require the Auditor to review and test the life company’s systems, processes and controls supporting the reporting of the information to enable the life company to provide reliable financial information to APRA. This review and testing must be done on:
(a)           an annual basis or more frequently if necessary to enable the Auditor to form an opinion on the reliability and accuracy of data; and
(b)          at least a limited assurance engagement consistent with professional standards and guidance notes issued by the Auditing and Assurance Standards Board (AUASB) as may be amended from time to time, to the extent that they are not inconsistent with the requirements of LPS 310.
11.         All information provided by a life company under this Reporting Standard must be subject to systems, processes and controls developed by the life company for the internal review and authorisation of that information. It is the responsibility of the Board and senior management of the life company to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
12.         Actuarial valuations and calculations included in or used in the preparation of the information provided to APRA must be in accordance with the prudential standards in force for the reporting period. However, life companies may use reasonable estimates when preparing information that will not be audited (i.e. for the first four submissions of information for a full financial year).
Authorisation
13.         When an officer of a life company provides the information required by this Reporting Standard using the ‘Direct to APRA’ software, it will be necessary for the officer to digitally sign the relevant information using a digital certificate acceptable to APRA.
14.         An officer of a life company submitting information under this Reporting Standard must be authorised by either:
(a)           the Principal Executive Officer of the life company; or
(b)          the Chief Financial Officer of the life company.
Variations
15.         APRA may, by written notice to the life company, vary the reporting requirements of Form LRF 400.0 in relation to that life company.
Transition
16.         A life company must report under the old reporting standard in respect of a transitional reporting period. For these purposes:
old reporting standard means the reporting standard revoked in the determination making this Reporting Standard (being the reporting standard which this Reporting Standard replaces); and
transitional reporting period means a reporting period under the old reporting standard:
(a)           which ended before the date of revocation of the old reporting standard; and
(b)          in relation to which the life company was required, under the old reporting standard, to report by a date on or after the date of revocation of the old reporting standard.
Note: For the avoidance of doubt, if a life company was required to report under an old reporting standard, and the reporting documents were due before the date of revocation of the old reporting standard, the life company is still required to provide any overdue reporting documents in accordance with the old reporting standard.
Interpretation
17.         In this Reporting Standard (including the attachments):
(a)           unless the contrary intention appears, words and expressions have the meanings given to them in Prudential Standard LPS 001 Definitions (LPS 001); and
(b)          capital standards means the prudential standards which relate to capital adequacy as defined in LPS 001;
Chief Financial Officer means the chief financial officer of the life company, by whatever name called;
financial year has the meaning in the Corporations Act 2001
general instruction guide refers to the general instruction guide set out in Attachment A of LRS 001;
Principal Executive Officer means the principal executive officer of the life company, by whatever name called, and whether or not he or she is a member of the governing board of the entity;
reporting period means a reporting period under paragraph 7 or, if applicable, paragraph 8.

LRF_400_0 Statement of Policy Liabilities
These instructions must be read in conjunction with the general instruction guide.
Explanatory notes
Classes of business
This section is to be completed for each class of business, as specified in the drop-down box list.
·           Australia – Superannuation business
·           Australia – Ordinary business
·           Overseas – All business
The expressions ‘ordinary business’ and ‘superannuation business’ are defined in the Life Insurance Act 1995 (the Act).
APRA product group
The APRA product groups that apply for the purpose of this form are:
Friendly societies
·           F1. Education;
·           F2. Investment Account;
·           F3. Annuity & Superannuation;
·           F4. Defined Benefit Risk;
·           F5. Capital Guaranteed Defined Contribution Funeral;
·           F6. Investment Linked.
Life companies other than friendly societies
·           L1. Conventional Participating;
·           L2. Participating Investment Account;
·           L3. Annuity with Longevity Risk;
·           L4. Individual Lump Sum Risk;
·           L5. Individual Disability Income Insurance;
·           L6. Group Lump Sum Risk;
·           L7. Group Disability Income Insurance;
·           L8. Investment Linked;
·           L9. Non-participating Investment Policy with Discretionary Additions;
·           L10. Other Non-participating Investment Policy;
·           L11. Annuity without Longevity Risk; and
·           L12. Other.
For each APRA product group, two iterations of reporting are required to capture the breakdown of sources of profit between policy owners and shareholders. This is controlled by the drop-down box titled profit allocation.
Valuation basis
Within each APRA product group, some data will be collected on up to three bases, indicated as follows:
·            ‘This year’ – current position, based on current year’s valuation basis;
·            ‘Last year’ – current position, based on previous year’s valuation basis; and
·            ‘LY/TY’ – current position, based on previous year’s valuation basis, except substituting current year’s investment and economic assumptions.
Instructions for specific items
1.         Policy liabilities - All statutory fund products
1.1.    In force business and movements in gross contractual regular contributions over the year
(1)          Policy count (actual number, not scaled)
This is the number of policies in the statutory fund at the end of the period.
This column is required to be reported on ‘This year’ basis only.
(2)          Member count (actual number, not scaled)
This is the number of members in the statutory fund at the end of the period. A member with more than one policy is considered as one member.  This would be based on the number of lives insured for group policies, joint-life individual policies, or policies that allow the insurance of auxiliary lives.
This column is required to be reported on ‘This year’ basis only.
(3)          Gross insurance amount, account balance or equivalent
This is the gross insurance amount or account balance of all the members of the fund.
(4)          Reinsured insurance amount, account balance or equivalent
This is the value of the reinsured portion of gross insurance amount or account balance of all the members of the fund, reported in item 3 above.
(5)          Gross contractual regular contributions
Include any business that is accepted through direct debit, has a specific contractual requirement for future on-going premiums, has an expectation of renewal each year (e.g. yearly renewable term products) or generally causes a policy to discontinue on cessation of future payment. It should be gross of all reinsurance.
This column is required to report on ‘This year’ basis only.
This amount should be equal to the amount reported for the previous year plus all movements for the current year.
(6)          Reinsured contractual regular contributions
Include any business that is accepted through direct debit, has a specific contractual requirement for future on-going premiums, has an expectation of renewal each year (e.g. yearly renewable term products) or generally causes a policy to discontinue on cessation of future payment. It should be net of all reinsurance.
 
This column is required to report on ‘This year’ basis only .
 
(7)          Gross contractual regular contribution increases over the year
Refer to all increases to contractual regular premiums due to new policies sold during the period, including CPI increases.
This column is required to report on ‘This year’ basis only.
(8)          Gross contractual regular contribution decreases due to claims and/or maturities
Decreases due to claims refer to the reduction in contractual regular contributions following a claim arising from the occurrence of an insured event. Note that it is only included when an insurance claim causes alteration or cessation of the premium, e.g. premiums paid on disability income policies will sometimes remain unaffected following a claim, depending on the policy terms and conditions.
Decreases due to maturities refer to the cessation of contractual regular contributions due to the maturity of a policy, i.e. following the completion of a policy’s term. This would occur when a member retires and is paid his/her superannuation benefit, a policy owner reaches a defined age on an Endowment policy or the termination of a savings plan on or after the contractual period.
This column is required to report on ‘This year’ basis only.
This item must be entered as a positive amount.
(9)          Gross contractual regular contribution decreases due to voluntary discontinuance
Include any decrease in contractual regular contributions due to lapses or surrenders of policies, i.e. the cessation of regular premiums prior to the completion of the policy’s term.
This column is required to report on ‘This year’ basis only.
This item must be entered as a positive amount.
(10)       Other movements in gross contractual regular contributions over the year
Include the increase/decrease in contractual contributions following transfers of business from one statutory fund to another or any other movements not recorded in previous columns.
This column is required to report on ‘This year’ basis only.
1.2.    Components of gross policy liability
Columns 1 to 10 are required to be reported separately on the three bases defined above (‘This year’, ‘Last year’ & ‘LY / TY’).
 
Columns 1 to 7 are for life insurance contracts. Columns 8 and 9 are for life investment contracts. All items are defined in Prudential Standard LPS 340 Valuation of Policy Liabilities (LPS 340).
 
For participating benefits, the best estimate liability includes past declared bonuses only. Current year bonuses are excluded.  For non-participating benefits with an entitlement to discretionary additions, the cost of the current year discretionary additions must be included as part of the best estimate liability.
(1)          Gross value of future policy benefits
Where business is valued using techniques other than projection techniques, gross value of future policy benefits includes the total liability, before deducting the value of unrecouped acquisition expenses.
(2)          Gross value of future expenses
 
(3)          Gross value of (balance of) future premiums
 
(4)          Gross reduction in respect of unrecouped acquisition expenses
Only for business valued using techniques other than a projection technique.
(5)          Total gross best estimate liability
This column will be calculated automatically by derivations contained within the form and represents the sum of columns 1 to 4.
(6)          Gross value of future profits: policy owner bonuses
For participating benefits, the value of future profits includes future bonuses only. Current year bonuses are excluded.
(7)          Gross value of future profits: shareholder profit margins
(8)          Gross investment contract liability
This is the net contractual obligation under a life investment contract which arises under the financial instrument element of the contract.
(9)          Gross management services asset or liability
This is the liability in respect of the management services element of a life investment contract. It includes deferred fee revenues and deferred acquisition costs.
(10)       Gross policy liability
This column will be calculated automatically by derivations contained within the form and represents the total amount of gross policy liability.
1.3.    Components of reinsured policy liability and net policy liability
Paragraph 122 of LPS 340 states that the reinsured policy liability consists of a reinsured best estimate liability and the value of the reinsured profit margins.  Reinsurance must meet the definition of an insurance contract and involve the transfer of insurance risk.
Columns 1 to 11 are required to be reported separately on the three bases defined above.  Columns 1 to 7 are for life insurance contracts. Columns 8 and 9 are for life investment contracts. Columns 1 to 10 correspond to the components of the gross policy liability in the previous section.
(11)     Net policy liability
This column represents the net amount of policy liability and the number entered should equal gross policy liability minus reinsured policy liability.
1.4.    Sundry items
The items included in columns 1 to 10 are defined in LPS 340.
Columns 1 to 3 and 5 to 7 are only relevant for participating business. Columns 4 and 8 to 11 are relevant for all product groups.
All figures in this section are to be reported on the ‘This year’ basis.
Where applicable, figures in this section are to be reported on a net of reinsurance basis.
(11)     Percentage of profit carrier or acquisition expense recovery carrier
This column is calculated automatically by the form and equals ‘shareholder profit margins on cost of current period best estimate bonus’ (Column (3)) divided by ‘profit carrier or acquisition expense recovery carrier’ (Column (10)).
2.         Totals by class of business and basis
Refer to the explanatory notes and specific reporting instructions for the corresponding items in section 1 ‘Policy liabilities - All statutory fund products’ for details.