ATTACHMENT A

Life Insurance Reporting Requirements

General Instruction Guide

1. Introduction

The General Instruction Guide is intended to assist in the completion and lodgement of the reporting standards required to be lodged with APRA under the Reporting Standards made under section 13 of the Financial Sector (Collection of Data) Act 2001 by companies registered under the Life Act. In this document 'life company' means any company registered under the Life Act, including a friendly society. References to 'life insurers' apply to life companies other than friendly societies.

Detailed instructions for the individual reporting items are provided in the specific instructions for each reporting standard. These specific instructions need to be considered in conjunction with this document, the relevant reporting standards and prudential standards[1].

This General Instruction Guide covers all the reporting standards for life companies.

2. Reporting level

This section details the reporting levels for completion of each reporting standard. Each reporting standard outlines whether reporting is required in respect of:

Each statutory fund for a life insurer and each approved benefit fund for a friendly society;
The shareholder fund for a life insurer and the management fund for a friendly society; and
The life company (i.e. company as whole for both life insurers & friendly societies).

3. Basis of preparation

3.1. Year to date

The financial information required to be reported must be reported as at the close of business for the last day of the reporting period, or for the year-to-date period ending at the close of business on the last day of the reporting period, as relevant.

3.2. General accounting basis

In completing the reporting standards, unless otherwise stated specifically, reporting life companies are to follow the basis consistent with the relevant Australian Accounting Standards. In particular, appropriate consideration must be given to the interpretation, the basis for measurement, and the netting between revenues/expenses items and financial assets/liabilities.

3.3. Actuarial valuation basis

All actuarial valuations and calculations included in, or used in the preparation of the reporting standards must be performed in accordance with the relevant prudential standards. The determination of policy liabilities must be in accordance with Prudential Standard LPS 340 Valuation of Policy Liabilities (LPS 340).

APRA recognises that full actuarial and other valuation procedures may not be used for valuing policy liabilities in all reporting periods. In such cases, reasonable estimation may be applied for valuing policy liabilities and such estimation needs to be based on the detailed valuation procedures. It must be noted that where such estimation processes have taken place, the approximating valuation methodology used by the life company must be subject to the advice of the Appointed Actuary, in line with the requirements of Prudential Standard CPS 320 Actuarial and Related Matters.

3.4. Fair value approach

For capital reporting purposes, fair values must be determined in accordance with Prudential Standard LPS 112 Capital Adequacy: Measurement of Capital.

For accounting reporting purposes, fair value has the same meaning as defined in AASB 13 Fair Value Measurement.

3.5. Units of measurement

Unless otherwise indicated by the specific item instructions, all reporting standards are to be prepared in whole Australian dollars (AUD) with no decimal place. Ratios are to be expressed to 2 decimal places. Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates.

3.6. Definitions

Definitions for the individual data items are included in the specific reporting instructions for each of the reporting standards.

Definitions, unless specified otherwise, apply to all life insurers and friendly societies. In a number of reporting standards, the term ‘statutory fund’ has been used to refer to a statutory fund of a life insurer or a benefit fund of a friendly society in the specific instructions. The term, ‘general fund’ has been used to refer to the shareholders’ fund of a life insurer or the management fund of a friendly society in the specific instructions.

Additionally, reference to shareholders has been used to refer to ‘members’ of a mutual association or society.

3.7. Related parties

Where this term is used or referred to in the reporting standards, it has the same meaning as it does in AASB 124 Related Party Disclosures.

4. Audit requirements

The reporting standards must be subjected to audit review and testing as detailed in Prudential Standard LPS 310 Audit and Related Matters.

5. APRA Product Group classification

For consistency of reporting across the range of reporting standards applicable to life companies, APRA adopts a single set of product groupings for life insurers and friendly societies. The appropriate APRA product groups must be used in accordance with the specific reporting standard.

The following tables specify the product groups applicable to life insurers and friendly societies.

5.1. Life insurers

The following product groups fall under participating and non-participating benefits. The expressions ‘participating benefits’ and ‘non-participating benefits’ are defined in the Life Act.

Within the relevant reporting standard, APRA has listed the product groups that apply.

Refer to Reporting Standard LRS 750.0 Claims and Disputes (LRS 750.0) for the definitions of ‘Death’, ‘TPD’, ‘Trauma’ and ‘DII’.

Refer to LRS 750.0 for the definitions of ‘Group’ and ‘Individual’.

Stepped premium policies are the policies where premiums increase each year according to risk factors (i.e. age). Other individual policies are the individual policies that are not stepped premium policies (e.g. level premium policies and hybrid stepped premium policies). For a reinsurer, determination of whether the premium structure of a reinsurance contract issued is stepped or non-stepped must be based on the premium structure of the treaty, and not based on the premium structure of the underlying risks written by the cedants.

5.2. Friendly Societies

The classification of participating and non-participating benefits does not apply to friendly societies.

6. Principles for allocating AASB 17 Insurance Contracts (AASB 17) numbers to APRA product groups (life insurers)

Life insurers are to apply the allocation principles (outlined below) to allocate AASB 17 numbers to APRA product groups (outlined under section 5) where it is not possible to clearly identify AASB 17 numbers and assign it to specific APRA product groups.

• Principle 1: To the extent that AASB 17 balance sheet and income statement items can be readily allocated to APRA product groups, they must be so allocated. Otherwise, the items (including CSM and / or loss component) are to be allocated using allocation approaches. The allocation approaches are to reflect allocation drivers determined based on accounting and / or actuarial judgments. For example, an insurer may decide to determine annual premium income and / or expected claims to be the allocation drivers to allocate AASB 17 items using proportions and / or ratios.
• Principle 2: A systematic and rational approach must be applied.
• Principle 3: The approach must be consistent over time. However, an insurer may change the approach if it views that the approach is no longer appropriate based on accounting and / or actuarial judgements.
• Principle 4: The aggregate of the allocated numbers across APRA product groups must be consistent with AASB 17 numbers reported on a statutory basis.
• Principle 5: A single allocation approach need not necessarily be applied.

Allocation approaches and allocation drivers must be clearly documented. This would support clarity and consistent application of the approaches and drivers for APRA product group reporting over time. Insurers must to prepare a document outlining how they have applied the allocation principles to allocate AASB 17 items to APRA product groups for APRA reporting.

For clarity, life insurers must not use allocation principles to allocate AASB 17 insurance and reinsurance assets and liabilities across the components of the Life Act reporting structure (for details, refer to the requirements outlined in LPS 340).