The purpose of this form is to capture information on the claims development profile of individual insurance companies and will also be used to construct industry data.
This instruction guide is provides general directions for completion of GRF 430.0 Claims Development Tables.
Insurers writing direct insurance business must complete this form based on accident years.
Insurers writing reinsurance business must complete this form based on underwriting years.
Audit requirements
The information provided under the form is not required to be audited and has been exempted from the definition of ‘yearly statutory accounts’.
Reporting entities
Forms are to be completed for the following reporting entities where appropriate:
Branch operations of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity);
Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity); and
Consolidated insurance groups.
Note: the form for the consolidated insurance group is only required to complete the information requirements on the form. No risk change is applied to the consolidated insurance group at this stage.
For the purposes of APRA prudential reporting, the consolidated insurance group is interpreted as the accounts incorporating the highest parent entity in a group structure, that is an Australian authorised general insurance entity (for the purposes of the Insurance Act 1973), and includes all subsidiaries, associates and joint ventures (registered both in Australia and overseas) of that parent entity.
For the purposes of this form, the highest parent entity in the corporate group does not include a company (e.g. non-operating holding company) that is not an authorised general insurance entity.
Definition of subsidiaries should be consistent with the requirements of Australian accounting standards AASB 1024 ‘Consolidated Accounts’ and definition of associates should be consistent with AASB 1016 ‘Accounting for Investments in Associates’.
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.
Part Reporting Form GRF 440.0 - Financial Sector (Collection of Data) determination No. 27 of 2005 - Reporting Form GRF 440.0 | Zoe
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).
Unit of measurement
This form is to be presented in Australian currency, rounded to thousands of dollars, with no decimal place. As a general rule, amounts denominated in foreign currency are to be converted to AUD in accordance with the requirements of the Australian accounting standards, notably AASB 1012 ‘Foreign Currency Translation’.
The general requirements of AASB 1012 for translation are:
Foreign currency monetary items outstanding at the reporting date must be translated at the spot rate at the reporting date; and
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:
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;
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; and
Translation of financial reports of foreign operations.
(A foreign operation is defined in AASB 1012 as meaning an entity for which financial reports are prepared in a foreign currency, and includes branches, associates and subsidiaries).
Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a self-sustaining foreign operation, must be recognised as 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.
However on incorporation of that foreign operation into the entity’s financial report (i.e. the preparation of consolidated group accounts), the translation of the financial reports of a self sustaining foreign operation as at the reporting date must be done using the current rate method (see below). Any exchange differences, together with any income tax expense (income tax revenue) must be taken directly to the foreign currency translation reserve within equity.
A self-sustaining foreign operation is defined in AASB 1012 as meaning a foreign operation that is financially and operational independent of the entity and whose operations do not normally expose the entity to foreign exchange gains and or losses.
Translation of financial reports of an integrated foreign operation must be translated as at the reporting date using the temporal method (see below) and any exchange differences must be recognised as revenues or expenses in the calculation of net profit and loss.
An integrated foreign operation is defined in AASB 1012 as a foreign operation that is financially and operationally interdependent, either directly or indirectly with the entity, and whose day to day operations normally expose the entity to foreign exchange gains or losses.
Current Rate Method of Translation
(a) Assets and liabilities are translated at the spot rate at the reporting date;
(b) Equity at the date of investment, including in the case of a corporation, share capital at acquisition and pre-acquisition reserves, is translated at the exchange rate current at that date;
(c) Post-acquisition movements in equity, other than retained profits (surplus) or accumulated losses (deficiency), are translated at the exchange rates current at the dates of those movements, except that where a movement represents a transfer between items within equity or a return of equity, the movement is translated at the exchange rate current at the date that the amount transferred or returned was first included in equity;
(d) Distributions from retained profits (that is, dividends paid or proposed, or their equivalent) are translated at the exchange rates current at the dates when the distributions were first recognised; and
(e) Revenue and expense items are translated at the exchange rates current at the applicable transaction dates except that revenues and expenses that have been restated in accordance with paragraph 7.11 of AASB 1012 are translated at the spot rate at the reporting date.[1]
Temporal Method of Translation
Means a method of translating the financial report of a foreign operation whereby:
(a) (i) monetary items are translated at the spot rate at the reporting date; and
(ii) non-monetary items are translated at exchange rates current at the transaction dates or, where a non-monetary item has been revalued or written-down or the write-down has been reversed, at the exchange rate current at the date of revaluation, write-down or reversal;
(b) equity at the date of investment, including in the case of a corporation, share capital at acquisition and pre-acquisition reserves, is translated at the exchange rate current at that date;
(c) post-acquisition movements in equity, other than retained profits (surplus) or accumulated losses (deficiency), are translated at the exchange rates current at the dates of those movements, except that where a movement represents a transfer between items within equity or a return of equity, the movement is translated at the exchange rate current at the date that the amount transferred or returned was first included in equity;
(d) distributions from retained profits (that is, dividends paid or proposed, or their equivalent) are translated at the exchange rates current at the dates when the distributions were first recognised; and
(e) revenue and expense items are translated at the exchange rates current at the applicable transaction dates, except that:
(i) revenues and expenses (including depreciation) that relate to non-monetary items are translated at the rates used to translate those non-monetary items; and
(ii) revenues and expenses that have been restated in accordance with paragraph 7.11 are translated at the spot rate at the reporting date.[2]
Spot rate means the exchange rate for immediate delivery of currencies to be exchanged.
Reporting period
Insurers are required to report the information in the reporting form on an annual basis.
The annual information is to be completed in respect of the financial year of the insurer.
The financial information requested in this form is to be reported as at the last day of the reporting period on a financial year to date basis of the insurer. See the Reporting Requirements table for details.
Reporting lag
This form must be lodged for each of the reporting units within the number of business days after the end of the quarter as set out in the Reporting Requirements table.
Specific instructions
General insurers that are writers of reinsurance business must complete this form based on underwriting year while general insurers that are writers of direct insurance business must complete this form based on accident year basis. These terms are explained below.
Accident Year
This refers to the year that the losses/claims associated with individual policies are incurred. The form is to be completed for each of the following years:
current accident year;
accident year, 1 year previous;
accident year, 2 years previous;
accident year, 3 years previous;
accident year, 4 years previous;
accident year, 5 years previous;
accident year, 6 years previous;
accident year, 7 years previous;
accident year, 8 years previous;
accident year, 9 years previous;
accident year, 10 years previous; and
accident year, more than 10 years previous.
Underwriting Year
Underwriting year refers to the year that the individual policy attaches and the subsequent risk associated with this policy accepted by the insurer, regardless of when the premiums and losses are actually reported, booked or paid. For example the 2001 underwriting year includes results in calendar year 2001 and all future calendar years on business bound in 2001.
current underwriting year;
underwriting year, 1 year previous;
underwriting year, 2 years previous;
underwriting year, 3 years previous;
underwriting year, 4 years previous;
underwriting year, 5 years previous;
underwriting year, 6 years previous;
underwriting year, 7 years previous;
underwriting year, 8 years previous;
underwriting year, 9 years previous;
underwriting year, 10 years previous; and
underwriting year, more than 10 years previous.
Each of the years in this form are complete years reported on a financial year to date basis as at the last business day of the financial year of the insurer. No adjustments are required to be made to prior year reported information.
Where possible insurers are requested to complete the entire series of years.
Classes of Insurance Business
Direct Business
The classes of business for companies that are not specialist reinsurers are as follows:
(I). Houseowners/Householders (H & H)
This class covers the common H & H policies inclusive of:
Contents;
Personal property;
Arson; and
Burglary.
Public liability normally attaching to these products are to be separated and included in Public and Product Liability class of business – item 8.
(II). Commercial Motor Vehicle
Motor vehicle insurance (including third party property damage) other than insurance covering vehicles defined below under Domestic Motor Vehicle. It includes long and medium haul trucks, cranes and special vehicles and policies covering fleets.
(III). Domestic Motor Vehicle
Motor vehicle insurance (including third party property damage) covering private use motor vehicles including utilities and lorries, motor cycles, private caravans, box and boat trailers and other vehicles not normally covered by business or commercial policies.
(IV). Travel
Insurance against losses associated with travel including loss of baggage and personal effects, losses on flight cancellations and overseas medical costs.
(V). Fire and Industrial Special Risks (ISR)
Fire
Includes all policies normally classified as 'Fire' and includes:
sprinkler leakage;
subsidence;
windstorm;
hailstone;
crop;
arson; and
loss of profits and any extraneous risk normally covered under fire policies, e.g. flood.
ISR
Standard policy wordings exist for this type of policy. All policies which contain such standard wordings or where the wording is substantially similar are to be classified as ISR.
(VI). Marine
Includes Marine Hull (including pleasure craft), Marine Cargo (including sea and inland transit insurance).
(VII). Aviation
Aviation (including aircraft hull and aircraft liability).
(VIII). Mortgage
Insurance against losses arising from the failure of debtors to meet financial obligations to creditors or under which payment of debts is guaranteed. It includes lease guarantee.
(IX). Consumer Credit (CCI)
Insurance to protect a consumer's ability to meet the loan repayments on personal loans and credit card finance in the event of death or loss of income due to injury, illness or unemployment.
(X). Other Accident
Includes the following types of insurance:
Miscellaneous accident (involving cash in transit, theft, loss of money);
All risks (baggage, sporting equipment, guns);
Engineering when not part of ISR or Fire policy;
Plate glass when not part of packaged policy (e.g. houseowners /householders)
Guarantee (Insurance Bonds);
Live Stock;
Pluvius; and
Sickness and Accident (which provides stated benefits where the insured is killed or suffers loss of specific parts of the body or is prevented from carrying out the insured’s normal occupation. In addition, regular benefits may be paid over a short period of time (typically less than 3 years), noting that continuous disability policies are now considered to be Life Insurance Policies and should not be provided by General Insurance companies).
(XI). Other
All other insurance business not specifically mentioned elsewhere. It includes, for example:
All guarantees (e.g. fidelity Guarantee)
Trade Credit;
Extended Warranty (includes insurance by a third party for a period in excess of the manufacturer's or seller’s normal warranty;
Kidnap and Ransom; and
Contingency.
(XII). Compulsory Third Party Motor Vehicle (CTP)
This class consists only of CTP business.
(XIII). Public and Product Liability
Public Liability covers legal liability to the public in respect of bodily injury or property damage arising out of the operation of the insured's business. Product Liability includes policies that provide for compensation for loss and or injury caused by, or as a result of, the use of goods. and also environmental clean-up caused by pollution spills where not covered by Fire and ISR policies.
Also will include builders warranty insurance.
(XIV). Professional Indemnity (PI)
Includes Directors' and Officers' liability insurance plus legal expense insurance. Cover for legal expenses general included in this type of policy.
(XV). Employers' Liability (EL)
Includes:
Workers' compensation;
Seamen's compensation; and
Domestic workers compensation.
Reinsurance Business
The classes of business for companies that are specialist reinsurers are as follows:
(I). Facultative;
(II). Proportional; and
(III). Excess of loss.
(I). Facultative Reinsurance
The reinsurance of individual risks by offer and acceptance wherein the reinsurer has the “faculty” (option) to accept or reject each offer by the ceding company.
(II). Proportional Reinsurance
A proportional treaty is an agreement between an insurer and a reinsurer in which the reinsurer shares an identical proportion of the premiums and losses of the ceding company.
(III). Excess of Loss Reinsurance
Reinsurance which, subject to a specified limit, indemnifies the ceding company against the loss in excess of a specified retention. This type of reinsurance can involve:
any one risk reinsurance;
any one event reinsurance;
catastrophe reinsurance;
aggregate excess of loss reinsurance; and
stop loss reinsurance.
Reinsurance non-split
This line item classification disclosed under Reinsurance class of business is to be used where it is not possible for the insurer to separately slit out all the classes of reinsurance businesses. However as required by GGN 110.3 Insurance Risk Capital Charge, where an insurer writes inwards reinsurance business and is unable to split this business into the classes and types listed in Table 2 of this Guidance Note, they are to use the highest casualty factors on their outstanding claims liabilities.
Where an insurer writes inwards reinsurance which spans multiple classes and the insurer cannot readily split the contract between classes, APRA suggests that the contract should be allocated using one of the following methods:
(a) allocate the contract to the category which represents the greatest exposure; or
(b) allocate the contract to the category representing the greatest premium income.
An insurer that writes inwards reinsurance is free to choose which of the above methods it uses, or may use another appropriate method, provided the same method is used for all contracts and all subsequent periods.
(1) Premium Earned ($'000)
Premium earned is to be reported gross of reinsurance expense. Premium earned is to be reported in this form only in accordance with AASB 1023 (i.e. recognised on an earned and unearned basis).
The amount reported for Current Accident/Underwriting Year will then be the same reported for the Accident/Underwriting Year - 1Year Previous in the following financial year. For example:
Financial Year Ended
Current Accident/Underwriting Year
Accident/Underwriting Year – 1 Year Previous
Accident/Underwriting Year - 2 Years Previous
31 December 2001
4,000
2,000
31 December 2002
5,000
4,000
2,000
Premium revenue is to take into account the following:
Do not include amounts collected on behalf of third parties i.e. government stamp duty and taxes;
Levies charged to customers are to be included such as fire service levies;
Deduct returned premiums and rebates;
Premiums are to be brought to account from the attachment date;
For installment premium policies, the amount of the annualised premium is to be reported; and
Premium revenue must be gross of reinsurance expense.
(2) Number of Claims
Report the total number of claims recorded for each class of business (total not just new claims). DO NOT include in this figure the number of claims recorded in relation to IBNRs and do not include number of claims paid.
This column is not applicable for business written under proportional treaties as this information is generally not known.
(3) Gross Claims Paid ($'000)
Report the amount of gross claims paid attributable to each accident/underwriting year on a cumulative basis, for classes of direct written business and re-insurance business. Do not adjust for reinsurance recoveries received.
(4) Reinsurance and Other Recoveries Received ($'000)
Report the amount of reinsurance and other recoveries received on claims paid attributable to each accident/underwriting year on a cumulative basis, for classes of direct written business and re-insurance business. Do not include reinsurance and other recoveries recognised on an accrual basis.
(5) Reinsurance Recoveries Receivable ($'000)
Report the amount of reinsurance recoveries that are expected to be receivable in relation to those claims recognised in the calculation of the outstanding claims provision and claims paid.
The amount is the balance outstanding at the end of the year.
This is to be undiscounted.
This amount can be recognised in accordance with AASB 1023.
(6) Other recoveries receivable ($’000)
Report the amount of recoveries receivable other than recoveries from reinsurers (e.g. subrogation, salvage) as at the end of the development year for the specified accident/underwriting year, that are expected to be receivable in relation to those claims recognised in the calculation of the outstanding claims provision and claims paid.
The amount is the balance outstanding at the end of the year.
This is to be undiscounted.
(7) Case Estimate - Gross Outstanding Claims Liability ($'000)
The Outstanding Claims liability is to be disclosed by type of business (direct business and inward reinsurance business). This relates to the Outstanding Claims Liability as at the end of the development year for the specified accident/underwriting year.
For the purposes of this form, the outstanding claims liability must be:
The amount is the balance outstanding at the end of the year.
Undiscounted;
Gross of reinsurance recoveries;
Based on ‘Case Estimate’ only, do not include a risk margin; and
Do not include estimates of IBNR claims (Incurred but not reported).