Financial Sector (Collection of Data) (reporting standard) determination No. 65 of 2008
Reporting Standard GRS 130.3 (2008) Off Balance Sheet Business – Credit Support Received 
Financial Sector (Collection of Data) Act 2001
 
I, Charles Watts Littrell, a 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:
 
·        REVOKE Reporting Standard GRS 130.3 (2007) Off Balance Sheet Business – Credit Support Received which is in force as at the date of this determination (the old standard); and
 
·        DETERMINE Reporting Standard GRS 130.3 (2008) Off Balance Sheet Business – Credit Support Received in the form set out in the Schedule (the new standard), which applies to the financial sector entities referred to in paragraph 2 of the new standard.
 
Under section 15 of the Act, I DECLARE that the new standard shall begin to apply, and the old standard shall cease to apply, on the date of registration of this instrument on the Federal Register of Legislative Instruments.
 
Dated 16 October 2008
 
 
[Signed]
 
 
Charles Littrell
Executive General Manager
Policy, Research and Statistics
Interpretation
In this Determination
APRA means the Australian Prudential Regulation Authority.
Federal Register of Legislative Instruments means the register established under section 20 of the Legislative Instruments Act 2003.
 
Schedule
 
Reporting Standard GRS 130.3 (2008) Off Balance Sheet Business – Credit Support Received comprises the 19 pages commencing on the next page.
 
 
 
 
 

 
Reporting Standard GRS 130.3 (2008)
 
Off Balance Sheet Business – Credit Support Received
 
 
Objective of this reporting standard
This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act).  It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, off balance sheet exposures in the form of credit support received.
This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:
·               Form GRF 130.3 Off Balance Sheet Business – Credit Support Received (Form GRF 130.3) designated for a ‘Licensed Insurer’ and ‘Consolidated Insurance Group’ and the associated instructions (which are attached and all form part of this reporting standard); and
·               any prudential standards referenced in the attached instructions.
 
Purpose
1.             Data collected in Form GRF 130.3 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with the capital standards.
Application and commencement
2.             This reporting standard applies to all insurers for reporting periods commencing on or after 1 July 2008. 
Information required
3.             An insurer must provide APRA with the information required by Form GRF 130.3 for each reporting period.
Forms and method of submission
4.             The information required by this reporting standard must be given to APRA either:
(a)           in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or
(b)          by manually completing Form GRF 130.3 on paper and mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales.
 
Where the information is submitted by means of an agent to whom the insurer has outsourced the function of providing the information on the insurer’s behalf, the agent may only provide the information in accordance with subparagraph 4(b) if the agent has contacted APRA and advised that the agent cannot submit the information in electronic form under subparagraph 4(a).
           
Note: the Direct to APRA application software and paper forms may be obtained from APRA. 
Reporting periods and due dates
5.             Subject to paragraph 6, an insurer must provide the information required by this reporting standard:
(a)           in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and
(b)          in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.
Note: The annual information required by paragraph 3 read with subparagraph 5(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act).  This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act.  Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards. 
6.             APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:
(a)           more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or
(b)          less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 5(a) or (b)).
7.             The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:
(a)           in the case of the quarterly information required by subparagraph 5(a) – 20 business days after the end of the reporting period to which the information relates; and
(b)          in the case of the annual information required by subparagraph 5(b) – 4 months after the end of the reporting period to which the information relates.
Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards.  The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts.  Accordingly, the auditor’s certificate in relation to the information provided under paragraph 3 read with subparagraph 5(b) must be provided to APRA by the time specified in subparagraph 7(b) of this reporting standard (unless an extension is granted under paragraph 8).
8.             APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
9.             The information provided by an insurer under this reporting standard must be the product of processes and controls that have been reviewed and tested by the appointed auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable.  This review and testing must be done on an annual basis or more frequently if necessary to enable the appointed auditor to form an opinion on the accuracy and reliability of the data. 
10.         The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.
Authorisation
11.         If the officer of an insurer provides the information required by this reporting standard:
(a)           under subparagraph 4(a), the officer must digitally sign, authorise and encrypt the information (for which purpose APRA’s certificate authority will issue digital certificates, for use with the ‘Direct to APRA’ application, to officers of the insurer who have authority from the insurer to transmit data to APRA); or
(b)          under subparagraph 4(b), the completed form must be signed in accordance with paragraph 13.
12.         If an insurer provides the information required by this reporting standard through an agent under either subparagraph 4(a) or (b), the agent will not be required to sign or authorise the information.  However, the insurer must:
(a)           obtain from the agent a paper copy of the completed form as provided to APRA (whether it was provided under subparagraph 4(a) or (b)); and
(b)          cause the paper copy to be signed in accordance with paragraph 13; and
(c)           lodge the signed paper copy with APRA by mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales, by the relevant due date (unless APRA, in writing, waives the requirement to lodge the signed paper copy with APRA by varying this reporting standard in relation to the insurer).
Note: APRA may, for example, determine to waive the requirement under subparagraph 12(c) where an insurer has undertaken to retain the signed copy of the completed form for an agreed period of time.
13.         If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:
(c)           the Principal Executive Officer of the insurer; or
(d)          the Chief Financial Officer of the insurer (whatever his or her official title may be).
Minor alterations to forms and instructions
14.         APRA may make minor variations to the instructions to a form, to clarify their application to the form without changing any substantive requirement in the form or instructions.
15.         If APRA makes such a variation it must notify insurers in writing.
Transition
16.         An insurer must report in relation to a reporting period ending prior to 1 July 2008 in accordance with the reporting standard that this reporting standard replaced.  
Interpretation
17.         In this reporting standard:
appointed auditor means an auditor appointed under paragraph 39(1)(a) of the Insurance Act;
business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;
capital standards means the prudential standards which relate to capital adequacy as defined in Prudential Standard GPS 001 Definitions;
foreign insurer means a foreign general insurer within the meaning of the Insurance Act;
Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.
Insurance Act means the Insurance Act 1973;
insurer means a general insurer within the meaning of the Insurance Act;
Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.
Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;
reporting period means a period mentioned in subparagraph 5(a) or (b) or, if applicable, paragraph 6.
18.         A reference to a prudential standard means the prudential standard, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time.  If the prudential standard has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it.
 
 
 
 
 
 
 
 
 
Reporting Form GRF 130.3
Off Balance Sheet Business – Credit Support Received
Instruction Guide
Introduction
This form captures information on any guarantees or other form of direct credit support provided to the insurer (reinsurer). This information will be included in the calculation of the minimum capital requirement as specified in GPS 114 Capital Adequacy: Investment Risk Capital Charge (GPS 114).
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Guidance Statement issued by the Auditing and Assurance Standards Board.
Information provided in the form in respect of a financial year of an insurer forms part of the insurer’s ‘yearly statutory accounts’ within the meaning of section 3 of the Insurance Act 1973.  This means that:
·               the completed form for the financial year must be audited by the Approved Auditor of the insurer (see paragraph 49J(1)(a) of the Act);  
·               the insurer must make such arrangements as to enable the auditor to do this (subsection 49J(2)); 
·               the auditor must give the insurer a certificate relating to the completed form (and other completed forms that are part of the insurer’s 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 (subsection 49J(3)); 
·               the certificate must be lodged with APRA as provided for in the prudential standards (paragraph 49L(1)(a)), namely by the due date for lodging the form in respect of the financial year for the insurer.
Reporting entity
This form is to be completed by:
1.             Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
2.             Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
3.             Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).
Unit of measurement
Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.
The general requirements of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ for translation are:
1.             Foreign currency monetary items[1] outstanding at the reporting date must be translated at the spot rate[2] at the reporting date.
2.             Foreign currency non-monetary items[3] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
3.             Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’.  However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (eg some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
4.              Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
·               Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
·               Translation of financial reports should otherwise follow the requirements in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’. 
Reporting period
Insurers are required to report the information in the reporting form on a quarterly and annual basis.
·               The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
·               The annual information is to be completed in respect of the financial year of the insurer.
·               The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer.
Reporting lag
This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in Reporting Standard GRS 130.3 Off Balance Sheet Business – Credit Support Received.
Related party disclosure
Related party has the same meaning as defined in AASB 124 ‘Related Party Disclosure’ which defines related party to include the parent entity of the Insurer, controlled entities, associates, joint ventures and directors of the licensed insurance entity and other entities that are deemed to be related in accordance with AASB 124.
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(a)           controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
(b)          has significant influence over the entity or has joint control over the entity; or
(c)           is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or
(d)          is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or
(e)           is a member of the key management personnel of the entity or its parent; or
(f)            is a close member of the family of any individual referred to in (a), (b) or (e); or
(g)           is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
(h)           is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
Specific instructions
GPS 114 outlines the treatment of eligible collateral and guarantees as risk mitigants.
The capital charge for Investment Risk may be reduced where the insurer holds certain types of collateral against an asset, or where the asset has been guaranteed, as a means of reducing risk.
The form is broken into two parts:
·               Part A - Eligible Collateral Provided to Reporting Insurer; and
·               Part B – Guarantees or Letter of Credit Provided to Reporting Insurer.
Part A - Eligible Collateral Provided to Reporting Insurer
Relating to reinsurance recoverables from non-APRA-authorised reinsurer[4]
Where an insurer possesses recognised collateral in Australia against reinsurance recoverables due from a non-APRA-authorised reinsurer, it may apply the Investment Capital Factor relevant to the collateral to the value of the reinsurance recoverables (instead of applying the capital factor that would otherwise apply to the reinsurance recoverables).
For the purposes of this paragraph, collateral is recognised only:
(a)           to the extent that it takes the form of:
(i)            assets held in Australia which form part of a trust fund maintained by a trustee resident in Australia;
(ii)           deposits held by the insurer in Australia made by the non-APRA-authorised reinsurer;
(iii)         a combination of the two forms of collateral specified in paragraphs (a) and (b); or
(iv)         any other form of collateral as may be approved by APRA in writing in a particular case;
(b)          if it provides effective security against liabilities arising under the reinsurance contract; and
(c)           if it is not available for distribution to creditors of the reinsurer other than the insurer in the event of insolvency of the reinsurer.
 
Where the fair value of the collateral does not cover the full value of the reinsurance recoverables, only that part of the value of the reinsurance recoverables that is covered by collateral may be assigned the Investment Capital Factor applicable to the collateral.
The collateral must be effective for the expected period for payment of claims under the reinsurance contract under which the reinsurance recoverables arise. If this is impractical, the collateral must be effective for at least 2 years but be renegotiable each year to allow at least a year to identify alternative arrangements if the collateral cannot be renegotiated.
Collateral provided to the insurer other than for reinsurance recoverables from non-APRA-authorised reinsurer
Where an insurer possesses recognised collateral against an asset, it may apply the Investment Risk Capital Factor relevant to the collateral to the value of the asset (instead of applying the capital factor that would otherwise apply to the asset).  Collateral will be recognised only to the extent that it takes the form of a charge, mortgage or other security interest in, or over, an Eligible Collateral Item. 
Where the collateral relates to an asset other than for reinsurance recoverables from non-APRA-authorised reinsurer, the eligible collateral items are cash, Government securities, or debt obligations where the obligor has a counterparty rating in Grade 1, 2 or 3.  The ‘Eligible Collateral Item’ must also be held for the period for which the asset is held.  Where the fair value of the collateral does not cover the full value of the asset, only that part of an asset that is covered by collateral may be assigned the Investment Capital Factor applicable to the collateral. Fair value has the same meaning as defined in the Australian accounting standards, that is, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction.
This form facilitates the calculation of whether the insurer is able to claim a reduction in the investment capital charge which is calculated in other forms. Accordingly the fair value of an insurer’s investments is to be entered in other forms for the calculation of investment risk charge without adjusting for any guarantee or eligible collateral.
A brief outline of the required data for each column in the form is provided to assist in completion of the form:
1.      Name of entity providing the collateral to the reporting insurer
Disclose the name of the entity that is providing the eligible collateral to the reporting insurer.
2.      Relating to reinsurance recoverable due from non-APRA-authorised reinsurer?
Disclose whether the collateral is related to reinsurance recoverable due from non-APRA-authorised reinsurer. Select “Yes” or “No”.
Fair value of the eligible collateral items provided as credit support for assets of the Insurer
Where there are various eligible collateral items (i.e. mix of  collateral items satisfying columns (3) – (11)), supporting one asset, allocate each eligible collateral item separately in the appropriate columns.
Where collateral items support more than one asset, rows must be completed for each supported asset with eligible collateral items pro rated among those supported assets.
To be ‘Eligible Collateral’, items must be held for the period for which the asset is held. These items should be recorded as the fair value of the outstanding balance where appropriate.
The column numbers in the following table corresponds with the column numbers in this form.
Column
Eligible Collateral Item
Investment Capital Factor

3.
Cash (notes and coins)
Debt obligations of:
·         the Commonwealth Government;
·         an Australian State or Territory government; or
·         the national government of a foreign country where:
- the security  has a Grade 1 counterparty rating; or, if not rated,
- the long-term, foreign currency counterparty rating of that country is Grade 1
Assets in respect of anticipated recoveries from the Commonwealth Government or from an Australian State or Territory government
 
0.5%

4.
Any debt obligation that matures or is redeemable in less than one year with a counterparty rating of Grade 1 or 2 (excluding subordinated debt[5] and debt obligations of government dealt with specifically in this Table)
Cash management trusts with a counterparty rating of Grade 1 or 2
 
1%

5.
Any other debt obligation (that matures or is redeemable in one year or more) with a counterparty rating of Grade 1 or 2 (excluding subordinated debt and debt obligations of government dealt with specifically in this Table)
 
2%

6.
Any other debt obligation with a counterparty rating of Grade 3 (excluding subordinated debt)
Cash management trusts with a counterparty rating of Grade 3
 
4%

7.
Any other debt obligation with a counterparty rating of Grade 4 (excluding subordinated debt)
Cash management trusts with a counterparty rating of Grade 4
 
6%

8.
Any other debt obligation with a counterparty rating of Grade 5 (excluding unlisted subordinated debt)
Cash management trusts with a counterparty rating of Grade 5
Listed subordinated debt
 
8%

9.
Unlisted subordinated debt
 
10%

10.
Listed equity instruments
Listed trusts except where otherwise provided for in this Table
16%

11.
Direct holdings of real estate
Unlisted equity instruments
Unlisted trusts except where otherwise provided for in this Table
Other assets not assigned an Investment Capital Factor elsewhere in this Table (other than hybrid instruments with both equity and debt features)
 
20%

 
12.  Total Eligible Collateral Provided
This field is automatically calculated by the form and represents the sum of columns (3) to (11).
Assets of the insurer that are subject of the credit support.
Under these columns report only the value of assets that are subject to the credit support.
13. Investment Capital Factor of Assets Being Supported
Report the investment capital factor applicable for the type of asset being supported by the eligible collateral. GPS 114 outlines the investment capital factors that are applicable for each type of asset.
If the eligible collateral supports more than one asset type having different investment capital factors, the insurer will be required to separately record each type of asset to correctly calculate the reduction in the investment capital charge. In this case record each different type of asset (that has a different investment capital factor) on separate lines and allocate the eligible collateral provided between these different assets (e.g. could be prorated based on the proportion of each type of supported asset to the total value of supported assets).
14. Fair value of assets subject to credit support
Record the fair value of the assets that are subject to the credit support.
15. Related party
For each eligible collateral, disclose the nature of the counterparty providing the collateral.  If it is a related party, select ‘P’ for parent entity, ‘S’ for subsidiary, or ‘O’ for other related party.  Refer to earlier pages in the instruction guide for the definition of related entity.
 
16. Adjustment to Investment Capital Charge
This field automatically calculates the required reduction in the investment capital charge due to the support of the ‘Eligible Collateral Items’.
 
Part B - Guarantees or Letter of Credit Provided to Reporting Insurer
Relating to reinsurance recoverables from non-APRA-authorised reinsurer
Where an insurer possesses a guarantee or a letter of credit in respect of the reinsurance recoverables due from a non-APRA-authorised reinsurer, the Investment Capital Factor to be used is that applicable to the guarantor or the issuer of the letter of credit, as the case may be. This applies only if:
·          The guarantor or the issuer of the letter of credit is an authorised deposit-taking institution or in the case of a Category E insurer[6], its parent entity or other related entity provided the entity has a counterparty rating of Grade 1, 2 or 3;
·          The guarantee or letter of credit is explicit, unconditional and irrevocable;
·          The guarantor or issuer of the letter of credit is obliged to pay the insurer in Australia; and
·          The obligation of the guarantor or issuer of the letter of credit to pay the insurer is specifically linked to performance of the reinsurance contract or contracts under which the reinsurance recoverables arise.
Except in the case of a Category E insurer, a guarantee or letter of credit provided to an insurer by its parent entity or a related entity is not eligible for this treatment provided for in this paragraph.
The guarantee or letter of credit must be effective for the expected period for payment of claims under the reinsurance contract under which the reinsurance recoverables arise. If this is impractical, the guarantee or letter of credit must be effective for at least 2 years but be renegotiable each year to allow at least a year to identify alternative arrangements if the guarantee or letter of credit cannot be renegotiated.
Guarantees provided to the insurer other than for reinsurance recoverables from non-APRA-authorised reinsurer
Where the guarantees provided to the insurer relates to an asset other than for reinsurance recoverables from a non-APRA-authorised reinsurer, the assets of the reporting insurer that have been explicitly, unconditionally and irrevocably guaranteed for their remaining term to maturity by a guarantor with a counterparty rating (or for governments, the long-term foreign currency credit rating) of Grades 1, 2 or 3 may be assigned the Investment Capital Factor that would be applicable to the guarantor.
Guarantees provided to an insurer by its own parent or a related party are not eligible for this treatment. Refer to earlier pages in the instruction guide for the definition of related entity.
Where the value of the guarantee does not cover the full fair value of the asset, only that part of an asset that is covered by the guarantee may be assigned the Investment Capital Factor applicable to the guarantor. Fair value has the same meaning as defined in the Australian accounting standards, that is, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s-length transaction.
1.             Name of entity providing the guarantee or letter of credit to the reporting insurer
Disclose the name of the entity that is providing the guarantee or direct credit support to the reporting insurer.
2.             Relating to reinsurance recoverable due from non-APRA-authorised reinsurer?
Disclose whether the collateral is related to reinsurance recoverable due from a non-APRA-authorised reinsurer. Select “Yes” or “No”.
3.             Value of the Guarantee or Credit Received in Relation to Assets of the Insurer
Disclose the value of the guarantee or credit received by the reporting insurer that is supporting specific assets of the insurer.
4.             Counterparty rating Grade of Guarantor or Issuer
Input the counterparty rating grade applicable for the counterparty giving the guarantee (i.e. ratings 1 – 5).  Refer to GPS 114 for details of counterparty grades.
 Assets of the Insurer that are subject of the credit support
This form facilitates the calculation of the reduction in the investment capital charge as calculated in the GRF 140 series or GRF 301.0 Reinsurance Assets and Risk Charge. Accordingly the insurer’s investments are to be entered into the GRF 140 series or GRF 301 without adjustment for the guarantee or letter of credit.
5.             Investment Capital Factor of Assets Being Supported
Input the investment capital factor that is applicable for the type of asset being supported by the guarantee. GPS 114 outlines the investment capital factors that are applicable for each type of asset.
If the guarantee supports more than one asset type having different investment capital factors, the insurer will be required to separately record each type of asset to correctly calculate the reduction in the investment capital charge. In this case record each different type of asset (that has a different investment capital factor) on separate lines and allocate the eligible guarantee provided between these different assets (e.g. could be prorated based on the proportion of each type of supported asset to the total value of supported assets).
6.             Fair Value of the assets subject to credit support
Report the fair value of the assets that are subject to the credit support.
7.             Related party
For each guarantee or letter of credit to the Insurer, disclose the nature of the counterparty providing the support.  If it is a related party, select ‘P’ for parent entity, ‘S’ for subsidiary, or ‘O’ for other related party.  Refer to earlier pages in the instruction guide for the definition of related entity.
8.             Adjustment to Investment Capital Charge
This field automatically calculates the required reduction in the investment capital charge due to the support of the guarantee or letter of credit.
 
 

[1]           Monetary items are defined to mean units of currency held and assets and liabilities to be received or paid in a fixed or determinable number of units of currency.
[2]           Spot rate means the exchange rate for immediate delivery.
[3]           Examples of non-monetary items include amounts prepaid for goods and services (e.g. prepaid rent); goodwill; intangible assets; physical assets; and provisions that are to be settled by the delivery of a non-monetary asset.
 
[4]           Non-APRA-authorised reinsurer has the same meaning as in Prudential Standard GPS 001 Definitions.
[5]           Subordinated debt has the same meaning as in GPS 114.
[6]           Category E insurer has the same meaning as in GPS 001.