Financial Sector (Collection of Data) (reporting standard) determination No. 104 of 2013
Reporting Standard GRS 460.1_G Exposure Analysis by Reinsurance Counterparty (Level 2 Insurance Group)
Financial Sector (Collection of Data) Act 2001
I, Charles Littrell, delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) DETERMINE Reporting Standard GRS 460.1_G Exposure Analysis by Reinsurance Counterparty (Level 2 Insurance Group), 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 on 31 December 2013.
This instrument commences on 31 December 2013.
Dated: 13 December 2013
[Signed]
Charles Littrell
Executive General Manager
Policy, Statistics and International
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 GRS 460.1_G Exposure Analysis by Reinsurance Counterparty (Level 2 Insurance Group) comprises the 12 pages commencing on the following page.
Reporting Standard GRS 460.1_G
Exposure Analysis by Reinsurance Counterparty (Level 2 Insurance Group)
Objective of this Reporting Standard
This Reporting Standard sets out the requirements for the provision of information to APRA relating to a Level 2 insurance group’s exposures to reinsurance counterparties.
It includes Form GRF 460.1_G Exposure Analysis by Reinsurance Counterparty (G) 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.
Purpose
2. Information collected in Form GRF 460.1_G Exposure Analysis by Reinsurance Counterparty (G) (GRF 460.1_G) is used by APRA for the purposes of prudential supervision.
Application and commencement
3. This Reporting Standard applies to the parent entity of a Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001).
4. This Reporting Standard applies for reporting periods ending on or after 31 December 2013.
5. The parent entity of a Level 2 insurance group is required to ensure that each requirement in this Reporting Standard is complied with.
Information required
6. The parent entity of a Level 2 insurance group must provide APRA with the information required by GRF 460.1_G in respect of the Level 2 insurance group for each reporting period.
Forms and method of submission
7. 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 (also known as ‘D2A’) may be obtained from APRA.
Reporting periods and due dates
8. Subject to paragraph 9, the parent entity of a Level 2 insurance group must provide the information required by this Reporting Standard in respect of each financial year of the Level 2 insurance group.
9. If, having regard to the particular circumstances of a Level 2 insurance group, APRA considers it necessary or desirable to obtain information more or less frequently than as provided by paragraph 8, APRA may change the reporting periods, or specify reporting periods, for the particular Level 2 insurance group.
10. The information required by this Reporting Standard must be provided to APRA:
(a) within the time stated in Reporting Standard GRS 001 Reporting Requirements (GRS 001); or
(b) in the case of information provided in accordance with paragraph 9, within the time specified by APRA.
11. APRA may grant the parent entity of a Level 2 insurance group an extension of a due date, in which case the new due date for the provision of the information will be the date on the notice of extension.
Quality control
12. All information provided by the parent entity of a Level 2 insurance group under this Reporting Standard must be subject to systems, processes and controls developed by the Level 2 insurance group for the internal review and authorisation of that information. It is the responsibility of the Board and senior management of the parent entity of the Level 2 insurance group to ensure that an appropriate set of policies and procedures for the authorisation of information submitted to APRA is in place.
13. Under Prudential Standard GPS 310 Audit and Related Matters (GPS 310), the Group Auditor of a Level 2 insurance group is not ordinarily required to provide a limited assurance review in relation to information provided by the parent entity of the Level 2 insurance group under this Reporting Standard.
Authorisation
14. When an officer or agent of the parent entity of a Level 2 insurance group provides the information required by this Reporting Standard using the ‘Direct to APRA’ software, it will be necessary for the officer or agent to digitally sign the relevant information using a digital certificate acceptable to APRA.
15. If the information required by this Reporting Standard is provided by an agent who submits using the ‘Direct to APRA’ software on the parent entity’s behalf, the parent entity of the Level 2 insurance group must:
(a) obtain from the agent a copy of the completed form with the information provided to APRA; and
(b) retain the completed copy.
16. An officer or agent of the parent entity of a Level 2 insurance group who submits the information under this Reporting Standard for, or on behalf of, the parent entity of the Level 2 insurance group must be authorised by either:
(a) the Principal Executive Officer of the parent entity of the Level 2 insurance group; or
(b) the Chief Financial Officer of the parent entity of the Level 2 insurance group.
Variations
17. APRA may vary the reporting requirements of GRF 460.1_G in relation to a Level 2 insurance group.
Interpretation
18. In this Reporting Standard:
(a) unless the contrary intention appears, words and expressions have the meanings given to them in GPS 001; and
(b) APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998;
Chief Financial Officer means the chief financial officer of the parent entity of the Level 2 insurance group, by whatever name called;
financial year means the financial year (within the meaning in the Corporations Act 2001) of the parent entity of the Level 2 insurance group;
general instruction guide refers to the general instruction guide set out in Attachment A of GRS 001;
Group Auditor has the meaning given in GPS 310;
Principal Executive Officer means the principal executive officer of the parent entity of the Level 2 insurance group, by whatever name called, and whether or not he or she is a member of the governing board of the parent entity of the Level 2 insurance group; and
reporting period means a period mentioned in paragraph 8 or, if applicable, paragraph 9.
19. Where this Reporting Standard provides for APRA to exercise a power or discretion, this power or discretion is to be exercised in writing.
Reporting Form GRF 460.1_G
Exposure Analysis by Reinsurance Counterparty (G)
Instructions
These instructions assist completion of Reporting Form GRF 460.1_G Exposure Analysis by Reinsurance Counterparty (G) (GRF 460.1_G). GRF 460.1_G collects information relating to the impact on the capital base and each component of the prescribed capital amount of a regulated institution due to a reinsurance counterparty failure. Information reported in GRF 460.1_G is primarily required for prudential purposes.
These instructions must be read in conjunction with the general instruction guide.
Audit matters
As a result of Insurance (exemption) determination No. 2 of 2013, the Appointed Auditor of a general insurer is not required to audit, or provide a certificate in relation to, information provided by a general insurer under Reporting Standard GRS 460.1 Exposure Analysis by Reinsurance Counterparty. Under Prudential Standard GPS 310 Audit and Related Matters (GPS 310) the Group Auditor of a Level 2 insurance group is not required to provide a limited assurance review in relation to information provided by the parent entity of a Level 2 insurance group under Reporting Standard GRS 460.1_G Exposure Analysis by Reinsurance Counterparty (Level 2 Insurance Group). APRA, however, may exercise its power under GPS 310 to require the Appointed Auditor or Group Auditor to undertake a special purpose review of the systems, processes and controls surrounding the completion of Reporting Form GRF 460.1 Exposure Analysis by Reinsurance Counterparty (GRF 460.1) and GRF 460.1_G, or the data contained within GRF 460.1 and GRF 460.1_G.
Supplementary information
The regulated institution must ensure that any underlying calculations and assumptions used to complete GRF 460.1_G are made available to APRA upon request from the regulated institution’s APRA responsible supervisor.
Reporting Level
GRF 460.1 must be completed by all Level 2 insurance groups.
Specific instructions
Terms highlighted in bold italics indicate that the definition is provided in these instructions. Additional definitions are provided at the end of these instructions.
Reporting Practice Guide GRPG 460 Reinsurance Counterparty Data Collection provides guidance to assist regulated institutions in completing GRF 460.1_G. Regulated institutions are permitted to use simplifying assumptions where those assumptions do not have a material impact on the resulting capital coverage of the regulated institution.
Exposure Analysis by Reinsurance Counterparty
Report individual counterparties on GRF 460.1_G where the failure of that counterparty results in a five per cent change in capital coverage of the regulated institution when compared to the capital coverage at the end of the financial year.
For the purposes of this reporting form, failure means that the counterparty will no longer meet their obligation to the regulated institution. This means that the regulated institution makes no recovery from on-balance sheet reinsurance assets and the reinsurer is not replaced on any of its previous or current reinsurance programs.
Reporting basis: report balances for Columns 7 to 13 as at the end of the financial year.
Unit of measurement: report amounts in Columns 7 to 13 as thousands of dollars.
| | Report each counterparty as a separate line item. For each counterparty report the Name of counterparty (reinsurer) in column 1, the Reinsurer identifier in column 2, the Counterparty group name in column 3, the APRA counterparty grade in column 4, the Counterparty domicile in column 5, the Group domicile in column 6, the Total impact on capital base, in column 7, the Total impact on Insurance Risk Charge in column 8, the Total impact on Insurance Concentration Risk Charge in column 9, the Total impact on Asset Risk Charge (after aggregation formula) in column 10, the Total impact on Asset Concentration Risk Charge in column 11, the Total impact on Operational Risk Charge in column 12 and the Total impact on prescribed capital amount in column 13. |
| Name of counterparty (reinsurer) | The legal name of the counterparty to the reinsurance exposure. Where relevant, use the name of counterparty as stated on the reinsurer identifier list. |
| Reinsurer identifier | The unique identifier for the counterparty reported in column 1. Where relevant, the reinsurer identifier must be reported as stated on the reinsurer identifier list. If the reinsurer is not on the reinsurer identifier list, report the reinsurer identifier as ‘unassigned’. |
| Counterparty group name | The name of the group to which the counterparty to the reinsurance exposure belongs. If the counterparty to the reinsurance exposure does not belong to a group, leave this column blank. Where relevant, the counterparty group name must be reported as stated on the reinsurer identifier list. If the counterparty group name is not on the reinsurer identifier list, report the counterparty group name as per these instructions. |
| APRA counterparty grade | The counterparty grade of 1 to 7 in accordance with Prudential Standard GPS 001 Definitions (GPS 001). |
| Counterparty domicile | For a subsidiary, the domicile is where the counterparty is legally incorporated. For a branch, the domicile is where the counterparty (branch) is located. Where relevant, the counterparty domicile must be reported as stated on the reinsurer identifier list. If the counterparty is not on the reinsurer identifier list, report the domicile using the domiciles in Appendix 1. |
| Group domicile | The domicile where the group owning the counterparty is legally incorporated. If the counterparty does not belong to a group, leave this column blank. Where relevant, the group domicile must be reported as stated on the reinsurer identifier list. If the group is not on the reinsurer identifier list, report the group domicile using the domiciles listed in Appendix 1. |
| Total impact on capital base | Report the decrease in capital base, after tax where applicable, due to the failure of the reinsurer reported in column 1. This takes into account changes as a result of the loss of the reinsurer on a regulated institution’s net outstanding claims liabilities and net premiums liability. This will include any change in the OCP surplus/deficit and PL surplus/deficit. Amounts reported for this item must be equal to or less than zero. |
| Total impact on Insurance Risk Charge | Report the increase in Insurance Risk Charge due to the failure of the reinsurer reported in column 1. This takes into account the impact on the OCP and PL risk charges as a result of the impact of a reinsurer failure on the net outstanding claims provisions and net premiums liabilities. A regulated institution may use simplifying assumptions as long as those assumptions do not have a material impact on the overall capital coverage outcome. Amounts reported for this item must be equal to or greater than zero. |
| Total impact on Insurance Concentration Risk Charge | Report the increase in the Insurance Concentration Risk Charge (ICRC) due to the failure of the reinsurer reported in column 1. This must consider the impact on each component of the ICRC (if applicable) and the current ICRC of the insurer. A regulated institution may use simplifying assumptions as long as those assumptions do not have a material impact on the overall capital coverage outcome. Amounts reported for this item must be equal to or greater than zero. |
| Total impact on Asset Risk Charge (after aggregation formula) | Report the change in the Asset Risk Charge due to the failure of the reinsurer reported in column 1. The amount reported must be after the aggregation formula in Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge is applied. A regulated institution may estimate this by applying the percentage of the aggregated risk charge components to the sum of the risk charge components on Reporting Form GRF 114.0 Asset Risk Charge or Reporting Form GRF 114.0_G Asset Risk Charge (G) for a Level 2 insurance group. In addition, a regulated institution may use simplifying assumptions as long as those assumptions do not have a material impact on the overall capital coverage outcome. Report an increase in the Asset Risk Charge as a positive amount and a decrease as a negative amount. |
| Total impact on Asset Concentration Risk Charge | Report the change in the Asset Concentration Risk Charge (ACRC) due to the failure of the reinsurer reported in column 1. A regulated institution must consider whether any existing ACRC due to the reinsurer reported in column 1 is decreased due to its failure. A regulated institution must also consider whether there is a change in the ACRC (either an increase in an existing ACRC or a new ACRC) due to a decrease in capital base from the failure of the reinsurer reported in column 1. Report an increase in the ACRC as a positive amount and a decrease as a negative amount. |
| Total impact on Operational Risk Charge | Report the increase in the Operational Risk Charge due to the failure of the reinsurer reported in column 1. A regulated institution may use simplifying assumptions as long as those assumptions do not have a material impact on the overall capital coverage outcome. Amounts reported for this item must be equal to or greater than zero. |
| Total impact on prescribed capital amount | Report the total change in prescribed capital amount due to the failure of the reinsurer reported in column 1. The total change in the prescribed capital amount is the change in the each component of the prescribed capital amount reported in columns 8 to 12 after applying the aggregation benefit in accordance with Prudential Standard GPS 110 Capital Adequacy. Amounts reported for this item must be equal to or less than the sum of columns 8 to 12 due to the increase in the aggregation benefit. |
Glossary of additional terms
| Capital coverage | This is the regulated institution’s capital base, determined under Prudential Standard GPS 112 Capital Adequacy: Measurement of Capital, divided by its prescribed capital amount, determined under Prudential Standard GPS 110 Capital Adequacy. |
| Asset concentration risk charge (ACRC) | This is the risk charge determined under Prudential Standard GPS 117 Capital Adequacy: Asset Concentration Risk Charge. |
| Asset risk charge | This is the risk charge determined under Prudential Standard GPS 114 Capital Adequacy: Asset Risk Charge. |
| Insurance concentration risk charge (ICRC) | This is the risk charge determined under Prudential Standard GPS 116 Capital Adequacy: Insurance Concentration Risk Charge. |
| Insurance risk charge | This is the risk charge determined under Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Charge. |
| OCP surplus/deficit | This is the net outstanding claims liabilities determined under Australian Accounting Standard AASB 1023 General Insurance Contracts (AASB 1023) in surplus or deficit to the net outstanding claims liabilities determined under Prudential Standard GPS 320 Actuarial and Related Matters (GPS 320). |
| Operational risk charge | This is the risk charge determined under Prudential Standard GPS 118 Capital Adequacy: Operational Risk Charge. |
| PL surplus/deficit | This is the net premiums liabilities determined under AASB 1023 in surplus or deficit to the net premiums liabilities determined under GPS 320. |
| Reinsurer identifier list | This is a list of reinsurers which includes the name of the counterparty, counterparty domicile, counterparty group name and group domicile that must be used for reporting on GRF 460.0 and GRF 460.0_G. The list is located on APRA’s website. |
Interpretation
For the purposes of these instructions:
· Appointed Auditor is defined in GPS 001;
· general insurer means a general insurer authorised under the Insurance Act 1973;
· Group Auditor is defined in GPS 001;
· regulated institution is defined in GPS 001 as a collective term for general insurers and Level 2 insurance groups; and
· Level 2 insurance group is defined in Attachment D of GPS 001.