Financial Sector (Collection of Data) determination No. 1 of 2005 Reporting Standard GRS 110.0 (2005) 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’) MAKE the reporting standard set out in the Schedule, which applies to financial sector entities of the kind specified in paragraph 2 of the reporting standard. Under section 15 of the Act, I DECLARE that the reporting standard shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments. Dated 21 June 2005 [signed] ……………………............ Charles Littrell Executive General Manager Policy, Research and Statistics Division APRA Interpretation In this Notice APRA means the Australian Prudential Regulation Authority.
Schedule
Reporting Standard GRS 110.0 (2005)
Minimum Capital Requirement
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, in relation to their Minimum Capital Requirement calculated in accordance with Prudential Standard GPS 110 Capital Adequacy for General Insurers. This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with: · the versions of Form GRF 110.0 Minimum Capital Requirement (Form GRF 110.0) designated for a ‘Licensed Insurer’ and ‘Branch Insurer’ and the associated instructions (which are attached and all form part of this reporting standard); and · Prudential Standard GPS 110 Capital Adequacy for General Insurers and Guidance Notes GGN 110.1, GGN 110.2, GGN 110.3, GGN 110.4 and GGN 110.5.
Purpose
1. Data collected in each version of Form GRF 110.0 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with Prudential Standard GPS 110.0 Capital Adequacy for General Insurers.
Application and commencement
2. This reporting standard applies to all insurers and shall begin to apply to those entities on the later of 1 July 2005 and the date of registration on the Federal Register of Legislative Instruments..
Information required
3. An insurer must provide APRA with the information required by the version of Form GRF 110.0 designated for a ‘Licensed Insurer’ for each reporting period. 4. A foreign insurer must provide APRA with the information required by the version of Form GRF 110.0 designated for a ‘Branch Insurer’ for each reporting period.
Forms and method of submission
5. The information required by this reporting standard must be given to APRA either: (a) in electronic form, using one of the electronic submission mechanisms provided by the ‘Direct to APRA’ (also known as ‘D2A’) application; or (b) manually completed on paper, which must be faxed or mailed to APRA’s head office. Note: the Direct to APRA application software and paper forms may be obtained from APRA. Reporting periods and due dates 6. Subject to paragraph 7, an insurer must provide the information required by this reporting standard: (a) in unaudited form – in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and (b) in audited form – in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer. Note: The annual information required by subparagraph 6(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. 7. 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 6(a) or (b)). 8. The information required by paragraphs 3 and 4 of this reporting standard must be provided to APRA by the following times: (a) in the case of the quarterly information required by subparagraph 6(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 6(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 relating to the annual information required by subparagraph 6(b) must be provided to APRA by the time specified in subparagraph 8(b) of this reporting standard (unless an extension is granted under paragraph 9). 9. 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
10. 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 approved 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 approved auditor to form an opinion on the accuracy and reliability of the data. 11. 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
12. If an insurer submits information under this reporting standard using the ‘Direct to APRA’ software, it will be necessary for an officer of the insurer to digitally sign, authorise and encrypt the relevant data. For this purpose, APRA’s certificate authority will issue ‘digital certificates’, for use with the software, to officers of the insurer who have authority from the insurer to transmit the data to APRA. 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: (a) the Principal Executive Officer of the insurer; or (b) 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: (a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or (b) 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. Transitional 16. If a reporting period of an insurer ended on 30 June 2005, or ends after that date, the insurer must report under this reporting standard in respect of that reporting period. Interpretation 17. In this reporting standard: approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act; business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays; 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 6(a) or (b) or, if appropriate, paragraph 7. 18. A reference to a prudential standard or guidance note means the prudential standard or guidance note, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard or guidance note has been revoked and replaced, the reference shall be taken to be to the prudential standard or guidance note that has replaced it.
Reporting Form GRF 110.0
Minimum Capital Requirement
Instruction Guide
Introduction This form reports the summary of the individual required prudential risk/capital charges (and investment risk charge rebates), the net assets in Australia, capital base, Minimum Capital Requirement (MCR) and whether the reporting insurer has complied with the MCR as required by GPS 110 Capital Adequacy for General Insurers. The individual risk charges and capital base summarised on this form are calculated in other forms. The investment risk applicable for GRF 160.0 Derivatives Activity and Risk Charge and GRF 300.0 Statement of Financial Position are required to be manually entered and all others will be automatically updated by the D2A application. In addition, this form will automatically calculate the MCR of the reporting insurer (as required by GPS 110 Capital Adequacy for General Insurers) and the insurer’s excess/deficiency of capital and capital ratios.
Audit requirements
This form is required to be subject to audit review and testing. The scope and nature of audit testing required is outlined in the applicable Audit Guidance Statement issued by the Auditing and Assurance Board of the Australian Accounting Research Foundation. 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
1. Authorised insurance entities including a mutual (refer to form for ‘Licensed Insurer’); and 2. Authorised reinsurance entities (refer to form for ‘Licensed Insurer’). An authorised insurance/reinsurance entity is required to maintain prudential capital of an amount at least equal to its MCR, where the MCR is calculated on the total operations of the entity.
Unit of measurement
The form reports in Australian currency rounded in thousands of dollars (no decimal place). Ratios are expressed to 2 decimal places.
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. See the Reporting Requirements table for details.
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 the Reporting Requirements table.
Specific instructions 1. GRF 130.0 Off Balance Sheet Business - Credit Substitutes Provided and Risk Charge This represents the total risk/capital charge applicable for the credit substitutes provided the reporting insurer. This figure is calculated in item “13. TOTAL Off balance sheet required risk charge” in GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 2. GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge This represents the total risk/capital charge applicable for the charges and encumbrances granted by the reporting insurer. This figure is calculated in item “ADJUSTED REQUIRED CAPITAL CHARGE (column 10 - 11)” in GRF 130.2 Off Balance Sheet Business – Charges Granted and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 3. Investment Risk Charge from the following forms: 3.1. GRF 140.0 Investments - Direct Interest Holdings and Risk Charge This represents the total investment risk/capital charge applicable for the direct interest holdings of the reporting insurer. This figure represents the sum of the individual investment risk charges calculated under column heading “Investment Capital Charge $'000” in GRF 140.0 Investments - Direct Interest Holdings and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 3.2. GRF 140.1 Investments - Direct Equity Holdings and Risk Charge This represents the total investment risk/capital charge applicable for the direct equity holdings of the reporting insurer. This figure is calculated in column headed “Investment Risk (Capital) Charge $'000” for line items “3. Total equity securities listed on primary board of stock exchanges” and item “4. Total not listed on primary board of stock exchanges” in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 3.3. GRF 140.2 Investments - Direct Property Holdings and Risk Charge This represents the total investment risk/capital charge applicable for the direct property holdings of the reporting insurer. This figure is calculated in column headed “Investment Risk (Capital) Charge $'000” for line item “Total direct property investments” in GRF 140.2 Investments - Direct Property Holdings and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement.
3.4. GRF 140.3 Investments - Loans and Advances and Risk Charge This represents the total investment risk/capital charge applicable for the loans and advances provided by the reporting insurer. This figure represents the sum of the individual investment risk charges calculated under column heading “Investment Risk (Capital) Charge $'000” in GRF 140.3 Investments – Loans and Advances and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 3.5. GRF 140.4 Investments - Assets Indirectly Held and Risk Charge This represents the total investment risk/capital charge applicable for assets that are indirectly held by the reporting insurer. This figure represents the sum of the individual investment risk charges calculated in Table 2 under the column heading “Investment Risk (Capital) Charge $'000” in GRF 140.4 Investments – Assets Indirectly Held and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 3.6. GRF 300.0 Statement of Financial Position This represents the total investment risk/capital charge for applicable assets listed in GRF 300.0 Statement of Financial Position – Licensed Insurer (i.e. this excludes assets that are subject to a risk charge under investment GRF 140.0 – 140.4, GRF 150.0 and assets deducted from the Capital Base). This figure represents the sum of the individual investment risk charges calculated under the column heading “Investment Risk (Capital) Charge $'000” in GRF 300.0 Statement of Financial Position. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 3.7. Total Investment Risk Charge This item represents the total investment risk (capital) charge applicable from GRF 140.0 – GRF 140.4 and GRF 300.0 Statement of Financial Position. This figure will be automatically calculated and updated by the D2A application. 4. GRF 130.3 Off Balance Sheet Business - Credit Support Received (Investment Risk Charge Reduction) The capital charge for ‘Investment Risk’ may be reduced where the insurer holds certain types of collateral against an asset, or where an asset has been guaranteed, as a means of reducing risk. Accordingly this item represents the ‘rebate’ of the investment risk/capital charge on these assets that is calculated in either the investment GRF 140.0 – GRF 140.0 or GRF 300.0 Statement of Financial Position. i.e. it represents the difference in the Investment Risk Capital Factor relevant to the eligible collateral or guarantor to the value of the asset(s) compared to the Investment Risk Capital Factor applicable to the asset(s). This item is calculated in GRF 130.3 Off Balance Sheet Business - Credit Support Received (Investment Risk Charge Reduction) and represents the total of column headed “Adjustment to Investment Capital Charge $'000” in ‘Part A - Eligible Collateral Provided to Reporting Insurer’ and ‘Part B - Guarantees Provided to Reporting Insurer’. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 5. GRF 150.0 Asset Exposure Concentration Risk Charge This represents the total investment risk/capital charge for exposures listed in GRF 150.0 Asset Exposure Concentration Risk Charge. This figure represents the item “TOTAL ADJUSTED CONCENTRATION RISK CHARGE” calculated under column headed “Investment Risk Charge on Exposure in Excess of Threshold A$'000” in GRF 150.0 Asset Exposure Concentration Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 6. GRF 160.0 Derivatives Activity and Risk Charge This represents the total investment risk/capital charge for derivative exposures listed in GRF 160.0 Derivatives Activity and Risk Charge. This figure represents the sum of the individual investment risk charges calculated under the column heading “Investment Risk (Capital) Charge $'000” in GRF 160.0 Derivatives Activity and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 7. GRF 170.0 Maximum Event Retention Risk Charge (form GRF 170.0) This represents the total risk/capital charge applicable for the maximum catastrophe risk retention of the reporting insurer. This figure represents the amount disclosed in item “Total Maximum Event Retention Charge” in GRF 170.0 Maximum Event Retention Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 8. GRF 210.0 OCP Insurance Risk Charge This represents the total insurance risk/capital charge applicable for the insurer’s exposure to certain lines of insurance business (both direct and reinsurance business). This figure represents the “TOTAL” line item under column headed “OCP Insurance Risk Charge $'000” in GRF 210.0 OCP Insurance Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 9. GRF 210.1 Premium Liabilities Insurance Risk Charge This represents the total insurance risk/capital charge applicable for the insurer’s exposure to certain lines of insurance business (both direct and reinsurance business). This figure represents the “TOTAL” line item under column headed “Premium Liabilities Insurance Capital Charge $'000” in GRF 210.1 Premium Liabilities Insurance Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement.
10. Minimum Capital Requirement This item represents the sum of the following risk charges (items 1 to 9 above) listed in GRF 110.0 Minimum Capital Requirement: · GRF 130.0 Off Balance Sheet Business - Credit Substitutes Provided and Risk Charge; · GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge; · Total Investment Risk Charge; · GRF 130.3 Off Balance Sheet Business - Credit Support Received (Investment Risk Charge Reduction); · GRF 150.0 Asset Exposure Concentration Risk Charge; · GRF 160.0 Derivatives Activity and Risk Charge; · GRF 170.0 Maximum Event Retention Risk Charge; · GRF 210.0 OCP Insurance Risk Charge; and · GRF 210.1 Premium Liabilities Insurance Risk Charge. This figure will be automatically calculated and updated by the D2A application. 11. GRF 120.0 Determination of Capital Base This represents the total eligible capital base of the insurer. This figure represents the amount calculated in line item “Total Capital Base” under column headed “Eligible Capital $'000” in GRF 120.0 Determination of Capital Base. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 12. Capital Surplus (Deficiency) This figure represents the value of item “11. GRF 120.0 Determination of Capital Base” less the amount calculated for item “10. Minimum Capital Requirement”. This figure will be automatically calculated and updated by the D2A application. 13. Solvency Coverage This figure represents the value of item 11 GRF 120.0 Determination of Capital Base divided by the amount calculated for item 10 ‘Minimum Capital Requirement’. This figure will be automatically calculated and updated by the D2A application.
14. Capital Adequacy Ratio % This is another way of looking at the solvency coverage and this figure represents the value of item “10 Minimum Capital Requirement” divided by the value of item 11 GRF 120.0 Determination of Capital Base. This figure will be automatically calculated and updated by the D2A application. 15. Net Assets in Australia Net Assets in Australia determined from the following: 15.1. Net Assets per form GRF 300.0 Statement of Financial Position If the insurer does not have any business (i.e. assets and liabilities) outside of Australia then the insurer does not have to complete the GRF 300.0 Statement of Financial Position – Inside Australia and only has to complete GRF 300.0 Statement of Financial Position – Licensed Insurer. Accordingly where this is the case, the figure for reporting item “15.1 (and all items under point 15) Net Asset” on GRF 110.0 Minimum Capital Requirement must agree to the value of item “35. Net Assets” on GRF 300.0 Statement of Financial Position – Licensed Insurer. Where the insurer has business outside of Australia and must complete GRF 300.0 Statement of Financial Position – Inside Australia, then the figure for reporting item “11.1 Net Asset” on GRF 110.0 Minimum Capital Requirement must agree to the value of item “35. Net Assets” on GRF 300.0 Statement of Financial Position - Inside Australia. This figure needs to be manually input into this reporting item in GRF 110.0 Minimum Capital Requirement. Less: Assets specifically excluding from being considered inside Australia by Prudential Standard GPS 120 Assets In Australia for General Insurers: 15.2. Capital deductions per form GRF 120.0 Determination of Capital Base: 15.2.1. Goodwill This figure represents the value of item “14. Goodwill” in GRF 120.0 Determination of Capital Base. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 15.2.2. Other Intangible Assets This figure represents the value of item “15. Identifiable Intangible Assets” in GRF 120.0 Determination of Capital Base. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 15.2.3. Future income tax benefits/Deferred Tax Assets (net of any Deferred Tax Liabilities). This figure represents the value of item “16. Future income tax benefits/Deferred Tax Assets (net of any Deferred Tax Liabilities)” in GRF 120.0 Determination of Capital Base. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement. 15.3. Assets under a fixed or floating charge, mortgage or other security to the extent of the indebtedness secured by the value of those assets. Such assets are excluded from being considered inside Australia up to the value of the asset subject to a charge/encumbrance. Where the charge over the assets is only given to support the value of insurance liabilities of the insurer, only the excess of the value of the assets charge/encumbrance, over the value of the insurance liabilities is excluded from inside Australia. This figure represents the total of all items reported in column headed “Excess of Charge Assets over Liabilities Supported” in GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge. This figure needs to be manually input into this data field in GRF 110.0 Minimum Capital Requirement.
