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
This form is to be completed for each exposure that is greater than:
10% of Capital for authorised entities; or
10% of Net Assets for Australian branch operations.
Report individual asset exposures that exceed the above applicable 10% threshold, in the appropriate counterparty/asset rating bands listed in the first column on the form (i.e. “Grade 1 counterparty/assets”, “Grade 2 counterparty/assets”, “Grade 3 counterparty/ assets”, “Grade 4 counterparty/assets” and/or “Grade 5 counterparty/assets”).
Within each of these rating grades (i.e. ‘Grade 1 counterparty/asset (Rating AAA)’) categorize individual asset exposures that may comprise the total exposure for that obligator, in the appropriate row that matches the applicable investment capital factor. Refer to Attachment 1 and 2 of GGN 110.4 Investment Risk Capital Charge for further clarification on counterparty/asset grades and investment capital factors applying to assets. Where an obligator constitutes a number of exposures of a group of related counterparties to the Insurer, these exposures should be split within the one obligator section, according to the investment capital factors appropriate to the exposures. Refer to point 6 below for more information on related counterparties for the purposes of this form.
Note: The investment risk capital charge is only applied to concentrations that exceed the maximum concentration thresholds as a percentage of capital (licensed entities)/net assets (for branches) as specified in GGN 110.4 Investment Risk Capital Charge. These are:
counterparty or asset rating of Grade 4 or unrated – 50% of capital base/net assets; and
counterparty or asset rating of Grade 5 – 25% of the insurers capital base/net assets.
Other issues that must be noted for the purposes of completing this form are set out below:
For licensed insurance entities, ‘Capital Base’ of the Licensed entity must be determined in accordance GGN 110.1 Measurement of Capital Base. Similar principles apply for the calculation of the capital base for consolidated insurance group.
For branch operations, ‘Net Assets’ of the branch operation is calculated in accordance with the GRF 300.0 Statement of Financial Position.
Report all exposures in the appropriate counterparty/asset rating band columns and investment capital factor lines, gross except where the insurer has in place a netting agreements that is in the form of a legally recognised right to net or set off in accordance with AASB 1014 ‘Set-off and Extinguishment of Debt’.
Where the counterparty rating and/or investment capital factor of an asset is reduced due to credit support received (e.g. guarantee or eligible collateral as defined in GGN 110.4 Investment Risk Capital Charge), the exposure must be reported taking into account the credit support (i.e. in the appropriate reduced investment capital factor).
Exposures include claims and commitments of the licensed insurance company recorded both on and off the balance sheet of the reporting Insurer, that are of the following nature:
(a) Credit exposures (i.e. exposure to a counterparty or related counterparties); and/or
(b) Asset exposures that are not in the nature of a credit exposure (e.g. a direct property investment).
On-Balance Sheet Exposures
Report the gross recorded market value of exposures recognised on-balance sheet (i.e. exposure recorded in the Statement of Financial Position), accept where point 2 above is satisfied in regards to netting.
Off-Balance Sheet Exposures
Note: Refer to the GRF 130 series
For off-balance sheet transactions (i.e. exposures not recorded in GRF 300.0 Statement of Financial Position) and exposures, include the gross value/limit of re-insurance contracts, direct credit substitutes, trade and performance related contingent items, guarantees and other commitments, that are of a credit nature, whether revocable or not.
In determining whether a group of counterparties are related, the reporting Insurer should treat counterparties as related, where they are linked by cross guarantees, common ownership, ability to control, financial inter-dependency, or other connections which, in the Insurers assessment, identify the counterparties as representing a single risk.
The aggregation of exposures to individual counterparties should be undertaken for an insurer and any entities approved as part of its Extended Licensed Entity (refer to paragraphs 6-9 of GGN 110.4 Investment Risk Capital Charge).
Exposures of the reporting insurer to related parties (i.e. parent entity, subsidiaries, associates and joint ventures) must be included in the analysis. For the purpose of this form, a subsidiary is defined in accordance with AASB 1024 ‘Consolidated Accounts’, an associate is defined in accordance with AASB 1016 ‘Accounting for Investments in Associates’ and Joint Ventures in accordance with AASB 1006 ‘Accounting for Interests in Joint Ventures’.
APRA may ask an insurer to provide detailed information of its financial exposures (by way of investments, loans, standbys or guarantees), to selected individual subsidiaries, associates, joint ventures or other related entities.
Exposures to the foreign parent and the related entities of the parent (where applicable) are to also be considered in the analysis. This will include the following:
Direct Exposures
This incorporates direct exposures of the reporting insurer to the foreign parent and to any branches, subsidiaries and other related parties of the foreign parent.
Indirect Exposures
This incorporates indirect exposures of the Insurer covered by risk transfer arrangements to the reporting Insurer’s foreign parent or to the subsidiaries of the foreign parent.
The following column headings on the form are to be interpreted as set out below:
Type of Exposure (i.e. type of investment/asset)
Detail the type of asset (e.g. holdings of listed equity instruments, debt instruments, loan, units in listed or unlisted trusts, direct property holding, guarantee.
Is Performance of Asset Impaired [Y/N]
Mark “Y” or “N” in this column for each exposure listed. For the purposes of this form, impairment means there exists reasonable doubt that amounts of principal (or market value) and any associated amounts of accrued income (e.g. interest, dividends, distributions associated with the investment/asset) will be able to be collected by the Insurer.
Related party of Reporting Insurer [mark "X" in appropriate column]
If the asset/exposure of the insurer are to an entity that is related to the Insurer, mark an “X” in the appropriate column listed on the form:
parent entity of the insurer;
controlled entity of the insurer (for licensed entity)/other branch operation of the foreign parent (for branch operations);
associates and or joint venture of the insurer; and
other related entity of the insurer.
Refer to AASB 1024 for definition of parent entity and controlled entity and refer to AASB 1006 for the definition of joint ventures and AASB 1016 for the definition of associates.
Related parties
Related parties are 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:
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.
Disclose Type of Entity/Business
If Exposure is to a related party of the reporting insurer detail the type of business conducted by that related party.
On-Balance Sheet Exposures
Refers to exposures that are recorded in GRF 300.0 Statement of Financial Position. Report the gross recorded market value of exposures, accept where a legal right of set off exists in accordance with AASB 1014.
Off Balance Sheet Exposure
Relates to assets that are not recorded in GRF 300.0 Statement of Financial Position. (Refer to the GRF 130 series).
For off-balance sheet transactions and exposures, include the gross value/limit of re-insurance contracts, direct credit substitutes, trade and performance related contingent items, guarantees and other commitments, that are of a credit nature, whether revocable or not.
Total Exposure
Is the total of the “On Balance Sheet” and “Off Balance Sheet” amounts listed for each individual obligator/exposure.
Component of Investment representing goodwill & Other Intangible Assets
Refers to that component of the value of an investment in a controlled entity (as defined in AASB 1024) or associated entity (as defined in AASB 1016), that constitutes goodwill and or other intangible assets. This value will be included in the value disclosed under “On Balance Sheet Exposure”, but it needs to be separately disclosed in this column separately.
Note: (Do not deduct this component value from that the value disclosed under the column “ON Balance Sheet Exposure).
Concentration Exposure Threshold
The exposure thresholds are based on the Counterparty Rating Grade and are set out in GGN 110.4 Investment Risk Capital Charge. This will be automatically calculated by the form.
Exposure in Excess of Concentration Exposure Threshold
Automatically calculated by the form. Represents the aggregate exposure to the obligator that exceeds the concentration exposure threshold.
Exposure concentration risk charge
Automatically calculated by the form. In accordance with GGN 110.4 Investment Risk Capital Charge, a 100% capital factor is applied to the value of the concentration exposure in excess of the concentration exposure threshold.
Investment Risk Charge on Exposure in Excess of Threshold
The form automatically calculates the appropriate Investment Risk Charge attributable to the excess of the value of the exposure over the concentration exposure threshold. This is calculated so that it can be deducted in aggregate from the required exposure concentration risk charge calculated by the form. This charge is deducted because it is included in calculation of the insurers Investment Risk Charge.
Total Adjusted Concentration Risk Charge
Do not enter a value as this is automatically calculated by the form. It is calculated by deducted the Investment Risk Charge from the “Exposure Concentration Risk charge”. This value will feed into the calculation of the insurer’s minimum capital requirement.