Financial Sector (Collection of Data) (reporting standard) determination No. 10 of 2010 - GRS 310 (2010) - Revenue, Expenses and Statement of Financial Performance
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The purpose of form GRF 310.2 Claims Expense and Reinsurance Recoveries is to provide information on the following:
Claims expense by class of business (direct business and reinsurance), broken down into the following components:
claim payments made in the current year; and
movements in outstanding claims Liability (OCL).
Reinsurance recoveries revenue by class of business (direct business and reinsurance business relating to current and prior years;
Recoveries other than reinsurance by class of business (direct business and reinsurance business) relating to current and prior years
Reinsurance recoveries received on a cashflow basis (i.e. payments received rather than accrued); and
Claims paid on a cashflow basis (i.e. actually paid rather than accrued).
Audit requirements
The form relating to authorised insurance entities and reinsurance entities is required to be subject to audit review and testing.
The scope and nature of audit testing required is outlined in the applicable Auditing and Assurance Standards Board Guidance Statement issued by the Auditing and Assurance Standards Board.
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 (the Act). This means that:
the completed form for the financial year must be audited by the Appointed 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
Forms are to be completed for the following reporting entities where appropriate:
Section Part 1 and Part 2 - Financial Sector (Collection of Data) (reporting standard) determination No. 10 of 2010 - GRS 310 (2010) - Revenue, Expenses and Statement of Financial Performance - Part 1 and Part 2 | Zoe
Branch insurers 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); and
Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).
Definitions
Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.
Unit of measurement
Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ (AASB 121).
The general requirements of AASB 121 for translation are:
Foreign currency monetary items[10] outstanding at the reporting date must be translated at the spot rate[11] at the reporting date.
Foreign currency non-monetary items[12] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
Foreign currency non-monetary items that are measured at fair value will be translated at the exchange rate at the date when fair value was determined.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121.
For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.
As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.
Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.
The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.
Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.
Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
Translation of financial reports should otherwise follow the requirements in AASB 121.
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.
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 Reporting Standard GRS 310.2 Claims Expense and Reinsurance Recoveries.
Basis of preparation
Unless specifically mentioned in these instructions insurers should follow the recognition and measurement requirements of the Australian accounting standards in completing this form.
The interpretation and required measurement basis for items listed in the form are specified in these instructions.
Netting
Unless otherwise specifically stated, institutions are allowed to take advantage of netting agreements in relation to disclosure of data items in this form. Institutions are to comply with the prerequisite for netting outlined in Australian accounting standards AASB 7 ‘Financial Instruments: Disclosures’, AASB 139 and AASB 132 ‘Financial Instruments: Presentation’.
Related party disclosure
Amounts due from, loans to, debentures of, shares in, or units in a trust or body corporate that is related to the insurer are to be disclosed for items of assets and liabilities where indicated in the form. For the purposes of this form, related bodies corporate are to be interpreted consistently with the meaning as in AASB 124 ‘Related Party Disclosures’ (AASB 124).
In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:
(a) controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);
(b) has significant influence over the entity or has joint control over the entity; or
(c) is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or
(d) is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or
(e) is a member of the key management personnel of the entity or its parent; or
(f) is a close member of the family of any individual referred to in (a), (b) or (e); or
(g) is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or
(h) is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.
Specific instructions
Classes of Business (1)
Direct Business
The classes of insurance business 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 (XIII).
(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) and 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
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 by the terms of the policy provides benefits for no more than three years.
(XI). Other
All other insurance business not specifically mentioned elsewhere. It includes, for example:
Trade Credit;
Extended Warranty (where the insurer extends a 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.
Includes public liability attaching to houseowners/householders policies.
(XIV). Professional Indemnity (PI)
PI covers professionals against liability incurred as a result of errors and omissions in performing professional services which has resulted in economic losses suffered by third parties.
Includes Directors' and Officers' liability insurance plus legal expense insurance. Cover for legal expenses is generally included in this type of policy.
(XV). Employers' Liability (EL)
Includes:
Workers' compensation;
Seamen's compensation; and
Domestic workers compensation.
2. Reinsurance Business
The classes of business for companies that provide reinsurance are as follows:
Treaty Proportional: This refers to all forms of quota share and surplus reinsurance written on a treaty reinsurance arrangement where the reinsurer is bound to accept all business ceded by the reinsured subject to the terms and conditions of the pre-agreed treaty wording, and shares in the same proportion of premium and losses of the reinsured.
Treaty Excess of Loss: This refers to all reinsurance arrangements where the reinsurer is bound to accept all business ceded by the reinsured and the reinsurer pays losses only above an agreed predetermined limit (retention) up to an agreed maximum amount.
Facultative Proportional: This refers to non-treaty arrangements where each reinsurance contract is on an individual offer and acceptance basis and the reinsurer shares in the same proportion of premium and losses of the reinsured.
Facultative Excess of Loss: This refers to non-treaty arrangements where each reinsurance contract is on an individual offer and acceptance basis. The reinsurer pays losses only above an agreed predetermined limit (retention) up to an agreed maximum amount.
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 split out all the classes of reinsurance businesses.
Where an insurer writes inwards reinsurance which spans multiple classes and the insurer cannot readily split the contract between classes, the contract must be allocated using an appropriate method, including 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 underwrites 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.
Part 1 and Part 2
Claims expense
Claims expense for the purpose of this form is reported in relation to the following:
claim payments made in the current year, and
movements in OCL.
The column ‘Total gross claims expense’ is calculated automatically and is derived from the above components in the following way:
claim payments made in the current year
Less:
OCL at beginning of financial year
Add:
OCL at the end of the reporting period
Note: All components required for the calculation of ‘Total gross claims expense’ are to be reported gross of reinsurance recoveries and non-reinsurance recoveries.
Claims expense that relates to movements in the OCL is to be based on the OCL that is reported in GRF 300.0 Statement of Financial Position.
Note: The OCL reported in GRF 300.0Statement of Financial Position does not have to be equal to the amounts required by Prudential Standard GPS 310 Audit and Actuarial Reporting and Valuation or the amounts reported in GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge.
The total amount of claims expense reported in this form must match the total claims expense reported in the line item titled ‘Gross Claims Expense’ in GRF 310.0 Statement of Financial Performance.
The claims expense is to be disclosed by type of business (i.e. direct business and inwards reinsurance business).
Other recoveries revenue relating to current and prior years
Report the amount of recoveries other than reinsurance in relation to claims recognised in the calculation of the gross claims expense relating to current and prior years
Recoveries other than reinsurance are to be disclosed by type of business (i.e. direct business and inwards reinsurance business).
Reinsurance recoveries revenue relating to current and prior years
Report the amount of reinsurance recoveries in relation to claims recognised in the calculation of the gross claims expense relating to current and prior years.
The total amount reported in this form for this component must match the item titled ‘Reinsurance recoveries revenue relating to current and prior years’ in GRF 310.0 Statement of Financial Performance.
Reinsurance recoveries are to be disclosed by type of business (i.e. direct business and inwards reinsurance business).
Net claims expense
This is calculated automatically by the form and is derived as follows:
Total gross claims expense
Less
Other recoveries revenue relating to current and prior years
Less
Reinsurance recoveries revenue relating to current and prior years.
Current period net claims expense
Report at this item by class of business:
current period claims payments;
current period reported outstanding case estimates (that is case estimates created in the current period); and
current period incurred by not reported (IBNR) (and incurred but not enough reported) claims expenses.
Current period net claims expense should be defined and reported according to the following:
the current period is defined as the current financial year to date;
net of all recoverables (including input tax credits (ITCs), reinsurance, salvage, subrogation and other recovery types);
inclusive of claims handling expense, assuming that industry generally includes claims handling costs with the claim paid component of the incurred claims expense;
the outstanding claims component be inflated only i.e. undiscounted; and
the outstanding claims component be on a central estimate basis i.e. without risk margins.
Non-recurring items that are part of total net claims expense
Report the amount of ‘Net claims expense’ that has not been reported at ‘Current period net claims expense’ in this column.
Quarterly actuarial reviews are not required to be conducted specifically for the purposes of completing the above two items.
Reinsurance recoveries received (cashflow basis)
Report the amount of reinsurance recoveries received over the reporting period (on a year-to-date basis) in aggregate for direct business and inwards reinsurance business (i.e. disclosure in relation to individual class of business is not required). Do not include reinsurance recoveries recognised on an accrual basis, as that is recognised in ‘Reinsurance recoveries revenue relating to current and prior years’.
This relates to all reinsurance recoveries received on a cashflow basis in the current financial year, regardless of the financial year in which the reinsurance recovery may have been recognised as revenue (i.e. a prior financial year).
Claims paid (cashflow basis)
Report the amount of claims actually paid over the reporting period (on a year-to-date basis) in aggregate for direct written business and inwards reinsurance business (i.e. disclosure of claims paid in relation to individual class of business is not required). This relates to all claims paid on a cashflow basis in the current financial year, regardless of the financial year in which the claim may have been recognised as an expense (i.e. a prior financial year).
Business with related entities:
Parent entity
For total gross claims expense, reinsurance recoveries and recoveries other than reinsurance reported in this form, disclose amounts that are in connection with/from the parent entity of the licensed insurer.
Controlled entities / Controlled entities of the parent
For branches, the line item ‘Controlled entities/Controlled entities of the parent’ is to be interpreted as amounts in relation to ‘Controlled entities of the parent’, and for licensed insurance entities amounts are in relation to ‘Controlled entities’ of the reporting insurer.
For total gross claims expense, reinsurance recoveries and recoveries other than reinsurance reported in this form, disclose amounts that are with/from the controlled entities.
Associates / Joint Ventures
For total gross claims expense, reinsurance recoveries and recoveries other than reinsurance reported in this form, disclose amounts that are with/from Associates or Joint Ventures of the licensed insurer. Associates and Joint Ventures are defined in accordance with AASB 131 ‘Interests in Joint Ventures’ and AASB 128 ‘Investments in Associates’.
Other related entities
For total gross claims expense, reinsurance recoveries and recoveries other than reinsurance reported in this form, disclose amounts that are with/from any other related entity of the licensed insurer that are not specifically identified above. Refer to the definition of related parties as defined in the general section of this instruction guide.