Reporting Standard GRS 140.4 (2005)

Investments – Assets Indirectly Held by Insurer and Risk Charge

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, the composition of their investments.

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 140.4 Investments – Assets Indirectly Held by Insurer and Risk Charge (Form GRF 140.4) 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
• 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 140.4 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 140.4 designated for a ‘Licensed Insurer’ for each reporting period.

4. An insurer that is a highest parent entity in relation to a consolidated insurance group must also provide APRA with the information required by the version of Form GRF 140.4 designated for a ‘Consolidated Insurance Group’ 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 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 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. (The annual information required from a highest parent entity under paragraph 4 read with subparagraph 6(b) is not required to be audited. APRA proposes to determine an exemption, under section 7 of the Insurance Act, in relation to the obligations under Part IV Division 4 of the Act in respect of the auditing of this information.)

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 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 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 in relation to the annual information required under paragraph 3 read with 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 10).

9. The information required by paragraph 4 of this reporting standard from an insurer that is a highest parent entity must be provided to APRA by the following times:

(a) in the case of the quarterly information required by subparagraph 6(a) – 30 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.

10. 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

11. The information provided by an insurer under this reporting standard (other than the information required from a highest parent entity under paragraph 4) 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.

12. 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

13. 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.

14. 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

15. 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.

16. If APRA makes such a variation it must notify insurers in writing.

Transitional

17. 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

18. In this reporting standard:

Accounting Standard AASB 1024 means the accounting standard so designated made by the Australian Accounting Standards Board, being the accounting standard that applied in respect of reporting periods (within the meaning of that accounting standard) commencing immediately before 1 January 2005;

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;

consolidated insurance group means a group comprising:

(a) an insurer that is a highest parent entity; and

(b) each subsidiary under the control (within the meaning of Accounting Standard AASB 1024) of that insurer, whether the subsidiary is incorporated in Australia or not;

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.

highest parent entity means an insurer that satisfies all of the following conditions:

(a) it is incorporated in Australia;

(b) it has at least one subsidiary under its control (within the meaning of Accounting Standard AASB 1024); and

(c) it is not itself a subsidiary of an insurer that is incorporated in Australia;

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 applicable, paragraph 7.

19. 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.

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, the composition of their investments.

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 140.4 Investments – Assets Indirectly Held by Insurer and Risk Charge (Form GRF 140.4) 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
• 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 140.4 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 140.4 designated for a ‘Licensed Insurer’ for each reporting period.

4. An insurer that is a highest parent entity in relation to a consolidated insurance group must also provide APRA with the information required by the version of Form GRF 140.4 designated for a ‘Consolidated Insurance Group’ 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 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 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. (The annual information required from a highest parent entity under paragraph 4 read with subparagraph 6(b) is not required to be audited. APRA proposes to determine an exemption, under section 7 of the Insurance Act, in relation to the obligations under Part IV Division 4 of the Act in respect of the auditing of this information.)

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 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 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 in relation to the annual information required under paragraph 3 read with 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 10).

9. The information required by paragraph 4 of this reporting standard from an insurer that is a highest parent entity must be provided to APRA by the following times:

(a) in the case of the quarterly information required by subparagraph 6(a) – 30 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.

10. 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

11. The information provided by an insurer under this reporting standard (other than the information required from a highest parent entity under paragraph 4) 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.

12. 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

13. 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.

14. 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

15. 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.

16. If APRA makes such a variation it must notify insurers in writing.

Transitional

17. 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

18. In this reporting standard:

Accounting Standard AASB 1024 means the accounting standard so designated made by the Australian Accounting Standards Board, being the accounting standard that applied in respect of reporting periods (within the meaning of that accounting standard) commencing immediately before 1 January 2005;

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;

consolidated insurance group means a group comprising:

(a) an insurer that is a highest parent entity; and

(b) each subsidiary under the control (within the meaning of Accounting Standard AASB 1024) of that insurer, whether the subsidiary is incorporated in Australia or not;

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.

highest parent entity means an insurer that satisfies all of the following conditions:

(a) it is incorporated in Australia;

(b) it has at least one subsidiary under its control (within the meaning of Accounting Standard AASB 1024); and

(c) it is not itself a subsidiary of an insurer that is incorporated in Australia;

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 applicable, paragraph 7.

19. 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.

Instruction Guide

Introduction

This instruction guide is designed to assist in the completion of the GRF 140.4 Investments – Assets Indirectly Held by Insurer and Risk Charge.

Information on this form will be used by APRA to obtain an investment profile of the reporting insurer and to calculate in part the prudential Investment Risk Charge. Specific information in these forms will also be used by the Australian Bureau of Statistics (ABS) for statistical purposes.

For the purposes of completing the respective investment forms, only include investments that are included in the aggregate balance disclosed for the asset item titled “Investments integral to insurance operations” as designated as a current and non-current asset on GRF 300.0 Statement of Financial Position. Do not include in these investment forms asset items reported in any of the other asset categories in GRF 300.0 Statement of Financial Position (e.g. “Other investments”). Otherwise the asset items will be subject to two investment risk charges, one in GRF 300.0 Statement of Financial Position and another in the respective investment forms.

Investment Risk Charge

The Investment Risk Charge applicable for an insurer’s (and reinsurer’s) on-balance sheet Investment/Asset exposures is calculated in accordance with GGN 110.4 Investment Risk Capital Charge. The form categorises assets into investment capital factor groupings to calculate the applicable investment risk capital charge for each asset category. The aggregate Investment risk charge calculated is included in the calculation of the insurer’s minimum capital requirement.

The market value of each applicable asset/asset category is required to be disclosed into the appropriate cell for each column titled “Inside Australia” and “Total Operations”. Total Operations refers to assets recorded by the branch operation of a foreign insurer or insurance company, regardless of whether deemed insider or outside Australia. For guidance on classifying assets deemed to be recorded Inside Australia, refer to section 116A of the Insurance Act 1973 and GPS 120 Assets in Australia for General Insurers.

The Investment Risk Charge is calculated based on the market (fair) value of assets entered.

Audit requirements

The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing. The forms relating to the consolidated insurance group reporting unit is not 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

This form is to be completed for the following reporting entities:

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);
3. Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity); and
4. Consolidated insurance group (refer to form for ‘Consolidated Insurance Group’).

• The consolidated insurance group for the purposes of APRA prudential reporting, is interpreted as the accounts incorporating the highest parent entity in a corporate group, that is an Australian authorised general insurance entity, and includes all subsidiaries, associates and joint ventures (registered both in Australia and overseas) of that parent entity.

The consolidation process and definitions of controlled entities and associates and joint ventures should be consistent with the requirements of Australian accounting standards (AASB 1024 ‘Consolidated Accounts’, AASB 1006 ‘Accounting for Interests in Joint Ventures’ and AASB 1016 ‘Accounting for Investments in Associates’).

• In relation to a foreign insurance company authorised and registered to operate as a subsidiary operation in Australia, the application of the economic entity concept in this regard excludes the foreign parent company. It is to be applied to the subsidiary company authorised and registered to operate as a general insurance operation in Australia and all its subsidiaries, associated and joint ventures.

Exemptions from the Consolidated Insurance Group requirements

• Australian authorised insurers which do not have any subsidiaries are not required to complete the forms for this reporting unit.

• Australian authorised insurers which have subsidiaries, but the financial position of the consolidated insurance group is not materially different from that of the licensed insurance entity, are not required to complete the forms for this reporting unit (i.e. the subsidiaries do not have any material dealings/balances).

Definitions

Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’. In addition, the ‘Glossary of Terms’ also contains a list of definitions of common data reporting items.

Unit of measurement

GRF 140.4 Investments – Assets Indirectly Held by Insurer and Risk Charge is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 1012 ‘Foreign Currency Translation’.

The general requirements of AASB 1012 for translation are:

1. Foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date; and
2. Other items outstanding at the reporting date must not be retranslated subsequent to initial recognition of the transaction.

Monetary items are defined to mean money held and assets and liabilities that are to be received or paid in fixed or determinable amounts of money (e.g. claims payments, reinsurance recoveries).

Monetary items arising under foreign currency derivative contracts at the reporting date must be translated as follows:

• Where the exchange rate is fixed in the contract, at that fixed exchange rate; and

• Where the exchange rate varies, at the spot rate at the reporting date.

The general requirements of AASB 1012 for accounting treatment of exchange differences arising on translation are:

1. Exchange differences must be recognised as either revenues or expenses in the calculation of net profit or loss on GRF 310.3 Investment and Other Operating Income and Expense, in the reporting period in which the exchange rates change.
2. Exchange differences arise in respect of foreign currency monetary items which is directly attributable to the acquisition, construction or production of an asset that takes a long period of time to get ready for its intended use or sale, must be capitalised (net of any effects of a hedge) as part of the cost of that asset.

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.

Basis of preparation

In completing this form unless otherwise specifically stated below, general insurers are recommended to follow the Australian accounting standards where possible, regarding the interpretation, recognition and measurement of investments notably AASB 1023 ‘Financial Reporting of General Insurance Activities’.

The aggregate value of investments disclosed in the forms listed below must agree to the total of amounts reported as both current and non-current assets in items 3 and 8 of GRF 300.0 Statement of Financial Position.

• GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge

• GRF 140.1 Investments – Direct Equity Holdings and Risk Charge

• GRF 140.2 Investments – Direct Property Holdings and Risk Charge

• GRF 140.3 Investments – Loans and Advances and Risk Charge

• GRF 140.4 Investments – Assets Indirectly Held by the Insurer and Risk Charge

The value of these investments reported in this form (and all the above forms) may or may not equate to the value of investments deemed ‘integral to insurance operations’ as defined in AASB 1023. However APRA does not follow this classification basis. AASB 1023 defines Investments integral to the entity's general insurance activities means[1]:

(a) in relation to an entity - investments that are controlled by the entity in the conduct of its general insurance activities; and

(b) in relation to a consolidated group - investments controlled by the entities in the economic entity in the conduct of general insurance activities and investments controlled by subsidiaries of those entities.

Investments reported in this forms (and other forms listed above) can be valued at market value which is different from AASB 1023, which requires that investments integral to the entity's general insurance activities must be measured at net market values. However the investments must not be valued at cost. Either market value or net market value is to be adopted. Market value or fair value has the same meaning as defined in the Australian Accounting standards. Market value is defined for accounting purposes as a subset of fair value, where fair value means the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction, and is determined as follows:

1. The quoted market price in an active and liquid market (i.e. market value); or
2. when there is infrequent activity in a market, the market is not well established, small volumes are traded relative to the asset or liability to be valued, or a quoted market price is not available – an estimate of a price for the asset or liability in an active and liquid market.

Derivative instruments that are used to hedge investments that are included in the above forms are not to be reported in these forms, they are to be reported in GRF 160.0 Derivative Activity and Risk Charge.

For investments reported in this form, changes in the values at which such investments are measured must be recognised as revenues (or losses) in GRF 310.0 Statement of Financial Performance and GRF 310.3 Investment and Operating Income and Expense in the reporting period in which the changes occur.

Accounting Standards AASB 1021 ‘Depreciation of Non-Current Assets’ and AASB 1010 ‘Accounting for the Revaluation of Non-Current Assets’ do not apply to such investments.

Licensed Entity – Investment Capital Factor %

This column for each form discloses the appropriate investment capital factor for the asset type in accordance with GGN 110.4 Investment Risk Capital Charge Attachment 1.

Licensed Entity – Investment Risk Charge

This column for each form will calculate the appropriate investment risk charge in accordance with GGN 110.4 Investment Risk Capital Charge Attachment 1.

Holding of Units in Unit Trusts

Where the insurer’s investments are represented by holdings of units in unlisted or listed managed investment vehicles/entities, the following reporting is required:

• Units are to be reported in this form. This form requires amongst other things, disclosure of the value of the unit holding according to the nature of the underlying market exposure (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosure in accordance with the funds advised asset allocation.

• Holding must be disclosed as unlisted or listed units.

Exception

If the units are held in a related/controlled entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GGN 110.4 Investment Risk Capital Charge paragraphs 6 – 9. Once approved by APRA this will allow the insurer to look through the legal structures involved and to consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.

Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing

Where the transferee of the security effectively receives a lenders rate of return or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.

Under this method of accounting for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical Investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.

Securities Transacted not Settled (i.e. trade date accounting)

For the purposes the APRA forms include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business –Credit Substitutes Provided and Risk Charge.

Related parties

Where this term is used or referenced in these forms, related parties is to be interpreted consistently with its definition and meaning as contained in AASB 1017 ‘Related Party Disclosures’.

In accordance with AASB 1017 related party means, in relation to a reporting entity any:

(a) other entity that at any time during the financial year, has control or significant influence over the reporting entity; or

(b) other entity that at any time during the financial year, is subject to control or significant influence by the reporting entity; or

(c) other entity that, at any time during the financial year, is controlled by the same entity that controls the reporting entity. Referred to as a situation in which entities are subject to common control; or

(d) other entity that, at any time during the financial year, is controlled by the same entity that significantly influences the reporting entity; or

(e) other entity that, at any time during the financial year, is significantly influenced by the same entity that controls the reporting entity; or

(f) director of the reporting entity or any of their director-related entities; or

(g) director of any other entity identified as a related party under any of paragraphs (a) to (e), or any of their director-related entities;

but excludes any other entity (except those identified as a related party under paragraph (f)) where the related party relationship results solely from normal dealings of:

(h) financial institutions; or

(i) authorised trustee corporations; or

(j) fund managers; or

(k) trade unions; or

(l) statutory authorities; or

(m) government departments; or

(n) local governments.[2]

AASB 1017 defines director-related entities as meaning “the spouses of such directors, relatives of such directors or spouses and any other entity under the joint or several control or significant influence of such directors, spouses or relatives”.

Relative in relation to a person is defined in the Corporations Law to mean the spouse, partner, son, daughter, or brother or sister of the person.

Specific instructions

The following provides guidelines to facilitate in the specific disclosure of information requested by this form for the reporting insurer and where applicable the consolidated insurance group.

Table 1

List all investments of the reporting insurer in investment vehicles, which will include holdings in the following:

• individually managed mandates;

• units in wholesale trusts;

• units in retail/public offer unit trusts;

• managed investment schemes; and

• cash management trusts.

Include holdings in listed and unlisted trusts and related entities of the reporting insurer.

Exception:

If the units are held in a related/controlled entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GGN 110.4 Investment Risk Capital Charge paragraphs 6 – 9. Once approved by APRA this will allow the insurer to look through the legal structures involved and to consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.

Name and ABN

Use the full name of the investment vehicle as identified in the investment deed. Also disclose the Australian Business Number (ABN). Where there is no identifier associated with the investment vehicle leave this field blank.

Related Party

Disclose “yes” or “no” if the investment vehicle is a related party of the reporting insurer. For this purpose related entity has the meaning as set out above.

Closing Balance

Report the value of the holdings as at the end of the reporting date for each investment vehicle.

Table 2. Aggregate holdings in indirect investment vehicles classified into the following:

Where the reporting Insurer has disclosed investments in table 1 in the form, the aggregate holdings must be disclosed as required by this table.

1. Listed trusts

Disclose the aggregate value of the holding that constitutes listed units.

Note: do not include holdings of cash management trusts. These are to be disclosed on the form under point 3 to 6 (see below).

2. Unlisted trusts

Disclose the aggregate value of the holding that constitutes unlisted units.

Note: do not include holdings of cash management trusts. These are to be disclosed on the form under point 3 (see below).

3. Cash Management Trusts with Prudential Rating of Grade 1 or 2

List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 1 or 2. Refer to Attachment 1 and 2 of GGN 110.4 Investment Risk Capital Charge for detail on counterparty rating grades.

4. Cash Management Trusts with Prudential Rating of Grade 3

List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 3. Refer to Attachment 1 and 2 of GGN 110.4 Investment Risk Capital Charge for detail on counterparty rating grades.

5. Cash Management Trusts with Prudential Rating of Grade 4

List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 4 or are unlisted. Refer to Attachment 1 and 2 of GGN 110.4 Investment Risk Capital Charge for detail on counterparty rating grades.

6. Cash Management Trusts with Prudential Rating of Grade 5

List the aggregate value of holdings in investment vehicles, which constitute cash management trusts that have a rating of grade 5. Refer to Attachment 1 and 2 of GGN 110.4 Investment Risk Capital Charge for detail on counterparty rating grades.

7. Aggregate holdings representing exposure to the following asset classes:

This disclosure is separate from disclosure requirements contained in point 1 – 6 of this table. The aggregate value of the holdings disclosed in Table 1 must also be disclosed in accordance to the nature of the market exposure of the underlying assets (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosure in accordance with the funds advised asset allocation.

Column Headings of Table 2:

Total Funds

Disclose the aggregate value of the holdings (report the Australian dollar equivalent of funds invested in currencies other than the Australian dollar).

Represent Policyholders funds

Disclose the aggregate balance of investments disclosed in Table 1 that are designated as representing policyholders funds, where the insurer has established the investment management mandates along these terms to reflect the different cashflow/risk and return requirements of shareholders funds from policyholders/technical reserves.

Policyholders funds is also referred to as technical reserves/funds. Use of the term does not imply ownership of these funds by policyholders, like under life insurance.

Represent Shareholders funds

Disclose the aggregate balance of investments disclosed in Table 1 that are designated as representing shareholders funds, where the insurer has established the investment management mandates along these terms to reflect the different cashflow/risk and return requirements of shareholders funds from policyholders/technical reserves.

Investment Capital Factor %

Note: not applicable for consolidated insurance group

This column discloses the appropriate investment capital factor for the asset type in accordance with GGN 110.4 Investment Risk Capital Charge Attachment 1.

Investment Risk Charge

Note: not applicable for consolidated insurance group

This column will calculate the appropriate investment risk charge in accordance with GGN 110.4 Investment Risk Capital Charge Attachment 1.