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PR No. 36 Rules/Other as made
These Rules were made under subsection 252(1) of the Life Insurance Act 1995 (the Act) for the purposes of subsections 52(1) and (3) of the Act.
Administered by: Treasury
Registered 05 Feb 2009
Gazetted 30 Jun 1999
Date of repeal 01 Jul 2011
Repealed by Life Insurance (prudential standard) determination No. 12 of 2010 - Prudential Standard LPS 700 Friendly Society Benefit Funds

 

 

Life Insurance Act 1995

 

PRUDENTIAL RULES No 36

 

 

 

 

RESTRUCTURE OF STATUTORY FUNDS (S 52(1) & (3))

 

 

 

I, Graeme John Thompson, a delegate of the Australian Prudential Regulation Authority (“APRA”), under subsection 252(1) of the Life Insurance Act 1995 (the “Act”) MAKE the following Prudential Rules for the purposes of subsections 52(1) and (3) of the Act:

 

 

 

Application of these Prudential Rules

 

1.  These Prudential Rules apply to all life companies.  However, parts of these Prudential Rules apply only to friendly societies (which are life companies by virtue of subsection 16A(2) of the Act) and parts apply only to life companies that are not friendly societies.

 

Restructure of statutory funds

 

2.   Under section 52 of the Act, a life company may apply to APRA to restructure its statutory funds by making one or more policies that are referable to a statutory fund or funds of the company become referable to another statutory fund or funds of the company (whether existing or proposed).  An application for a restructure of a statutory fund under section 52 of the Act may only be made in accordance with these Prudential Rules.

 

Definitions

 

3.   In these Prudential Rules:

 

(a)        a reference to a ‘member’ in relation to a friendly society or an approved benefit fund means a person who has an interest in a benefit from an approved benefit fund in accordance with its approved benefit fund rules; and

 

(b)       further to subsection 10(2) and paragraph 16F(3)(b) of the Act, a reference to an ‘owner of a policy’ or ‘policy owner’ includes a reference to a member of an approved benefit fund; and

 

(c)        in accordance with section 16G of the Act, a reference to a ‘statutory fund’ includes a reference to an ‘approved benefit fund’.


 

Application

 

4.   An application for a restructure of a statutory fund must:

(a)       be in writing; and

(b)       state the date from which the restructure is proposed to have effect; and

 

(c)       in relation to a life company other than a friendly society, be accompanied by the documents mentioned in items 1 and 2 of Part 1 of Schedule 1 and be lodged with APRA at least 30 days before the proposed date of restructure; and

 

(d)       in relation to a friendly society, be accompanied by the documents mentioned in items 3 to 8 of Part 1 of Schedule 1 and be lodged with APRA at least 90 days, or such other period as APRA determines in writing, before the proposed date of restructure; and

 

(e)       be signed by:

(i)         the principal executive officer of the company; or

(ii)        an officer of the company who has been authorised for the purposes of this rule by the principal executive officer, if the principal executive officer has notified APRA in writing of the authorisation.

 

5.   The applicant must, on request by APRA and within the time specified, produce to APRA documents of the kind set out in Part 2 of Schedule 1.

 

Approval of application for restructure of statutory funds

 

6.   Subject to these Prudential Rules, APRA may approve an application by a life company for a restructure of its statutory funds.

 

7.   APRA may refuse to approve an application by a life company for a restructure of its statutory fund or funds if it considers that immediately after the restructure:

 

(a)       a transferring fund; or

 

(b)       a receiving fund;

 

will not satisfy the capital adequacy standard applicable to it under the Act.

 

Additional approval requirements - friendly societies

 

8.   If APRA approves an application by a friendly society under rule 6, the friendly society must obtain consent for the restructure, in relation to each approved benefit fund that is involved in the restructure, by either:

 

(a)       a special resolution, in accordance with the definition of ‘special resolution’ in section 9 of the Corporations Law as in force from time to time, (to be read as if references to ‘company’ used for the purposes of that definition are references to ‘approved benefit fund’) by the members of each approved benefit fund that is involved in the restructure; or

 

(b)       if APRA so determines in its approval given under rule 6, a resolution of the board of directors of the friendly society.


 

9.   A friendly society must, at least 21 days before a meeting of members to provide consent to a restructure under subrule 8(a), give personally or by post to each member of the approved benefit fund:

 

(a)       a copy of the documents mentioned in items 3, 4 and 8 of Part 1 of Schedule 1, or a summary of those  documents, that have been approved by APRA in writing; and

 

(b)       a notice of the meeting and the proposed special resolution in accordance with subrule 8(a).

 

10. If a proposed restructure is consented to in accordance with rule 8, the friendly society must within 30 days of that consent:

 

(a)       provide APRA with a copy of the resolutions made under rule 8; and

 

(b)       apply to APRA for approval of, whichever is applicable:

(i)         benefit fund rules in accordance with section 16L of the Act; and

(ii)        a proposed amendment of its approved benefit fund rules in accordance with section 16Q of the Act; and

(iii)       a proposed amendment of its constitution in accordance with section 16U of the Act.

 

NOTE:                   Prudential Rules No 40 details requirements for approval of new benefit fund rules, Prudential Rules No 41 details the requirements for friendly societies to amend their approved benefit fund rules and Prudential Rules No 43 details requirements for amendment of the constitution of a friendly society.

 

Identification of policies – life company other than a friendly society

 

11. Before a restructure has effect, a life company other than a friendly society must make a written determination identifying the policies referable to a transferring fund that are to be referable to a receiving fund.

 

Transfer of Assets

 

12. Rules 13, 14 and 15:

 

(a)       do not apply to a friendly society where the restructure consists only of a transfer of all the assets and liabilities from a single transferring fund to a single receiving fund; and

 

(b)       do apply to all life companies other than those specified in subrule (a).

 

13. A life company to which this rule applies shall transfer assets from a transferring fund to a receiving fund as soon as practicable after the transfer of liabilities from the transferring fund to the receiving fund.

 

14. Assets that are transferred from a transferring fund to a receiving fund shall be treated as assets of a receiving fund on and from the date the restructure has effect.

 

15. The nature and value of assets to be transferred from a transferring fund to a receiving fund is to be determined by the appointed actuary using a method that:

 

(a)       places a value on the liabilities that is consistent with the value being adopted for the assets; and


(b)       considers the nature and value of the assets in aggregate and also in respect of each particular class of assets; and

 

(c)       in view of the nature of the liabilities to be transferred to a receiving fund and those to remain in a transferring fund, has the objectives of:

 

(i)         facilitating the proper operation of the transferring fund and the receiving fund; and

 

(ii)        protecting the interests of the owners of the policies referable to the transferring fund and the receiving fund; and

 

(d)       is consistent with the method that was described in the appointed actuary’s report that:

 

(i)         was lodged with APRA in relation to the application in accordance with rule 4 and items 2 or 4 (as the case may be) of Part 1 of Schedule 1 to these Prudential Rules; and

 

(ii)       was approved by APRA as part of its approval under rule 6.

 

 

 

NOTE:                  For a friendly society where rules 13, 14 and 15 do not apply, assets are, under rule 18, transferred from a transferring fund to a receiving fund when amendments to the approved benefit rules are made.

 

When restructure has effect – life company other than a friendly society

 

16. The restructure of statutory funds of a life company other than a friendly society shall have effect when:

 

(a)       policies that, immediately before the restructure, were referable to a transferring fund become referable to a receiving fund; and

 

(b)       policy and other liabilities that, immediately before the restructure, were referable to a transferring fund become referable to a receiving fund; and

 

(c)       assets that, immediately before the restructure, were assets of a transferring fund become assets of a receiving fund

 

to the extent specified in documents supporting an application under rule 4 provided to APRA.

 

When restructure has effect – friendly society

 

17. The restructure of statutory funds of a friendly society shall have effect when:

 

(a)       benefit fund rules approved under section 16L of the Act come into force under section 16N of the Act to give effect to the restructure; and

 

(b)       proposed amendments to the approved benefit fund rules of the friendly society under section 16Q of the Act to give effect to the restructure come into force under section 16T of the Act.

 

18. A friendly society to which subrule 12(b) applies must comply with rules 13 to 15 as soon as practicable after a restructure has effect under rule 17.


Effect of restructure - friendly society

 

19. Upon a restructure of statutory funds of a friendly society having effect:

 

(a)       a member of a transferring fund who is in a category specified in documents provided to APRA under subrule 4(d) becomes a member of a receiving fund; and

 

(b)       the assets and undertakings of, and liabilities referable to, the transferring fund become, to the extent specified in documents provided to APRA under subrule 4(d), assets and undertakings of, and liabilities referable to, a receiving fund.

 

Notification of interested persons

 

20. A life company that restructures a statutory fund must, within 6 weeks of the restructure having effect, give written notice of the restructure of the fund to the owner of every policy referable to any of the funds involved in the restructure.

 

21. A notice under rule 20 must:

 

(a)       set out the matters mentioned in Part 1 of Schedule 2; and

 

(b)       be accompanied by the documents mentioned in Part 2 of Schedule 2.

 

22. In relation to a friendly society, APRA may grant an exemption, subject to any conditions it thinks fit, from any of the requirements of rules 20 and 21, if it considers that notification in accordance with those rules is not necessary.

 

Information to be lodged with APRA following the restructure – life company other than a friendly society

 

23. For a life company other than a friendly society, if a restructure of statutory funds involves the establishment of a new statutory fund (the ‘receiving fund’), the life company must give to APRA, within 6 weeks after the establishment of the receiving fund, a written notice setting out the following:

 

(a)       the nature and terms of the establishment of the receiving fund; and

 

(b)       the nature and value of assets transferred from a transferring fund to the receiving fund; and

 

(c)       the kinds of policies that are referable to the receiving fund.

 

24. The notice referred to in rule 23 must be accompanied by statements that the receiving fund has been established in accordance with section 52 of the Act, certified by:

 

(a)       the principal executive officer; and

 

(b)       the appointed actuary; and

 

(c)       the auditor.


 

Information to be lodged with APRA following the restructure – friendly society

 

25. A friendly society must lodge with APRA within 3 months, or such other period as APRA determines in writing, after a restructure takes effect:

 

(a)       audited accounts, or accounts in a form approved by APRA in writing, for each fund involved in the restructure up to the date that the restructure takes effect; and

 

(b)       such other information as APRA may require.

 

26. The accounts in rule 25 must include, if applicable:

 

(a)       details of any bonuses paid by the friendly society from any fund involved in the restructure and of any reserves retained by the friendly society in a fund during the period to which the accounts relate; and

(b)       a statement of the manner in which the units of a transferring fund were converted to units of a receiving fund.

 

 

 

This instrument commences on the transfer date (as defined in section 2 of the Financial Sector Reform (Amendments and Transitional Provisions) Act (No. 1) 1999).

 

 

 

 

Dated 24 June 1999

 

 

 

 

 

   [Signed]

 

G J Thompson

Chief Executive Officer

Australian Prudential Regulation Authority


 

SCHEDULE 1

 

Part 1 - Specified documents to be lodged with the application under rule 4

 

Life companies other than friendly societies

 

1.   A statement of the nature of the receiving fund and the terms and conditions on which the restructure is to take place.  The statement must include the following information:

 

(a)       the identity of a transferring fund and a receiving fund; and

 

(b)       the classes of life insurance business to be carried on by the company within the receiving fund; and

 

(c)       the categories of life insurance business to be carried on by the company within each of those classes; and

 

(d)       the sub-categories of life insurance business to be carried on by the company within each of those categories; and

 

(e)       the kinds of policies within those categories and sub-categories and, where the policies are referable to more than one fund, the benefits to be written by the company within those categories and sub-categories; and

 

(f)        the value of the policy liabilities to be transferred to the receiving fund, by kinds of policies; and

 

(g)       the value of the policy liabilities to remain in the transferring fund, by kinds of policies; and

 

(h)       the value of other liabilities (not being policy liabilities) to be transferred to the receiving fund; and

 

(i)        the value of other liabilities (not being policy liabilities) to remain in the transferring fund; and

 

(j)        the value of the assets to be transferred to the receiving fund, by asset class; and

 

(k)       the value of the assets to remain in the transferring fund, by asset class; and

 

(l)        the value of the amounts determined for the purposes of allocation and distribution of profits and losses under Divisions 5 and 6 of Part 4 of the Act to be transferred to the receiving fund; and

 

(m)      the value of the amounts determined for the purposes of allocation and distribution of profits and losses under Divisions 5 and 6 of Part 4 of the Act to remain in the transferring fund.

 

2.   A report by the appointed actuary on the proposed restructure, including:

 

(a)       a statement setting out the basis on which the nature and value of the assets to be transferred is to be determined; and

 

(b)       a statement as to whether the assets to be transferred are appropriate to the liabilities to be transferred; and

 

(c)       a statement as to whether the restructure will result in unfairness to the owners of the policies referable to any of the funds involved in the restructure; and


 

(d)       a statement as to whether, immediately after the restructure, a transferring fund and receiving fund will satisfy the solvency standard and the capital adequacy standard applicable to it under the Act.

 

Friendly societies

 

3.   A statement of the nature of the proposed restructure and terms and conditions on which the restructure is to take place.  The statement must, unless otherwise advised by APRA, include the following information:

 

(a)       the name of each fund that is to be involved in the restructure, any proposed change in the name of any such fund and the proposed name of any new fund; and

 

(b)       the date from which the restructure is proposed to have effect; and

 

(c)       the reasons for the proposed restructure; and

 

(d)       the effect of the proposed restructure on the interests of the members of each fund that is to be involved in the restructure; and

 

(e)       the assets and undertakings of, and liabilities referable to, each transferring fund that will become assets and undertakings of and liabilities referable to a receiving fund, in accordance with the report of the appointed actuary given under item 5 of Part 1 of Schedule 1; and

 

(f)        the category or categories of members of each transferring fund that, under the restructure, will become members of a receiving fund; and

 

(g)       any interest that any officer of the society has in the proposed restructure; and

 

(h)       any compensation or other consideration proposed to be paid, or any other incentive proposed to be given, to any officer or member of the society in relation to the proposed restructure; and

 

(i)        if applicable, an estimate of the rate of any bonuses payable from each fund up to the date on which it is proposed that the restructure will take effect; and

 

(j)        in the case of a transfer of part of a fund, details of any reserves that the society proposes to retain in the fund in accordance with the recommendations of the appointed actuary; and

 

(k)       whether there has been any material change to the financial position of the fund since the date at which the profit and loss statements or balance sheets were prepared under item 4 of Part 1 of Schedule 1; and

 

(l)        such other information as APRA requires.

 

4.   Unless APRA determines in writing that they are not required, the most recent audited:

 

(a)       profit and loss statement; and

 

(b)       balance sheet

 

prepared in accordance with Prudential Rules No 47 for each fund that is to be involved in the restructure, provided that they were prepared at a date no earlier than 6 months before the date of the application under rule 4.


 

5.   A report by the appointed actuary on the proposed restructure, including:

 

(a)       in relation to a restructure that does not consist of a transfer of all the assets and liabilities from a single transferring fund to a single receiving fund:

(i)         a statement setting out the basis on which the nature and value of the assets to be transferred is to be determined; and

(ii)        a statement as to whether the assets to be transferred are appropriate to the liabilities to be transferred; and

 

(b)       a statement as to whether the restructure will result in unfairness to the owners of the policies referable to any of the funds involved in the restructure; and

 

(c)       a statement as to whether, immediately after the restructure, a transferring fund and receiving fund will satisfy the solvency standard and capital adequacy standard applicable to it under the Act.

 

6.   A copy of:

 

(a)      any proposed new benefit fund rules; and

 

(b)      any proposed amendments to approved benefit fund rules; and

 

(c)      any proposed consequential amendments to the constitution of the friendly society.

 

in order to recognise the restructure.

 

7.   A copy of the notice proposed to be issued by the friendly society to notify members of each fund involved in the restructure, as required by rule 20.

 

8.   A certificate signed by the directors of the friendly society certifying that, having regard to

all matters relevant to the proposed restructure, the directors consider that the restructure would be in the interests of the members of each fund that is to be involved in the restructure.

 

 

 

Part 2 - Documents to be produced on request under rule 5

 

1.   A report by an independent actuary (being an actuary, other than the appointed actuary, who is approved by APRA in writing to perform duties as required by APRA and paid for by the friendly society for the purposes of these Prudential Rules) including statements on the same matters as those required of the appointed actuary.

 

2.   For a life company other than a friendly society, documents that are provided to policy owners or prospective policy owners of the company that contain details of the terms and conditions of:

 

(a)     policies of the kind that will remain referable to the transferring fund; or

 

(b)     policies of the kind that will become referable to the receiving fund.


 

SCHEDULE 2

 

Part 1 - Matters to be set out as required by rule 21

 

1.   The name and identifying details of the funds involved in the restructure.

 

2.   The date of the restructure.

 

3.   For a friendly society:

 

(a)       a statement, in relation to each fund affected by the restructure, whether the restructure affects the whole or part of the fund; and

 

(b)       a summary of how the restructure affects the interests of policy owners of each fund; and

 

(c)       details of:

 

(i)         any proposed new benefit fund rules; and

 

(ii)        any proposed amendments to approved benefit fund rules; and

 

(iii)       any proposed consequential amendments to the constitution of the friendly society.

 

in order to recognise the restructure.

 

4.   For a life company other than a friendly society:

 

(a)       the identifying details of each policy owner’s policy that is referable to either the transferring fund or the receiving fund; and

 

(b)       where the benefits under the policy are provided out of more than one statutory fund;

(i)         the benefits under the policy that are to be provided out of each fund; and

(ii)        either the proportion of the premium that is related to the benefits to be provided out of each fund and is to be credited to the fund or the way in which that proportion is to be calculated.

 

 

 

Part 2 - Documents to accompany notice as required by rule 21

 

1.   A document:

 

(a)      describing (in summary form) the reasons for the restructure; and

 

(b)      containing relevant extracts from any report by the appointed actuary on the proposed restructure under items 2 or 4 of Part 1 of Schedule 1, as applicable, which deal with implications for policy owners.

 

2.   For a life company other than a friendly society, a revision to the policy document by way of endorsement or written notice setting out the matters in items 1 and 2 of Part 1.