Division Section B: Related Party Exposures of a - Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2007 - LRS 220.0 - Large Exposures - Section B: Related Party Exposures of a Fund: | Zoe
Financial Sector (Collection of Data) (reporting standard) determination No. 22 of 2007 - LRS 220.0 - Large Exposures
Section B: Related Party Exposures of a Section B: Related Party Exposures of a Fund:
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LRF 220.0 Large Exposures (LRF 220.0) provides APRA with details of asset exposures greater than 1% of the value of assets of the fund and information about related party exposures. This enables APRA to monitor asset concentration risks and understand the type and extent of the funds dealings with related parties.
This Instruction Guide is designed to assist reporting entities in the completion of LRF 220.0. The Instruction Guide provides:
general directions and notes regarding preparation and lodgement; and
instructions relating to specific items.
General directions and notes
Reporting levels
LRF 220.0 must be completed by all life insurance companies, including friendly societies.
The form is to be completed separately for each statutory fund (approved benefit fund), except for a fund solely devoted to investment linked business, in which case the form is not required to be completed.
LRF 220.0 contains two sections:
Section A: Large Exposures of a Fund; and
Section B: Related Party Exposures of a Fund.
Within each section, reporting items are to be completed at total fund level, under the various categories of data required.
Unit of measurement
LRF 220.0 is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in foreign currency are to be converted to AUD in accordance with AASB 121 The Effects of Changes in Foreign Exchange Rates.
Definitions
Definitions for data reporting items required by this form have been provided where appropriate in the instructions under the section headed ‘Instructions for specific items’.
Definitions, unless specified, apply to all life insurance companies, including friendly societies as if each reference to a statutory fund, or shareholders’ fund, were a reference to an approved benefit fund, or management fund, respectively. Likewise, reference to shareholders should be taken to embrace ‘members’ of a mutual association and/or a society. The term ‘life companies’ or ‘life insurance companies’ includes friendly societies unless stated otherwise. This is in line with the usage of terms in the Life Insurance Act 1995.
Related entities
Under s16 of the Life Insurance Act 1995, whether a company is a subsidiary or a related company is to be determined in accordance with the Corporations Act 2001. The provisions of Division 6 of Part 1.2 of Chapter 1 of the Corporations Act 2001 are relevant for these purposes.
Exposures
An exposure to an entity is the aggregate of all claims, commitments and contingent liabilities arising from on- and off-balance sheet transactions with the entity. This includes equity investment in the entity.
Note: Where credit risk is unequivocally transferred from the entity to another entity by an irrevocable letter of credit or a direct guarantee, the exposure is to be recorded against the other entity.
Reporting period
Life companies are required to report the information in the reporting form on a quarterly and annual basis.
The quarterly information is to be completed as at the end of each quarter based on the financial year of the life company, not the calendar year.
The annual information is to be completed as at the end of the financial year of the life company.
The financial information required in this form is to be reported as at the close of business for the last day of the reporting period.
Basis of preparation
In completing this form, unless specifically stated otherwise, institutions are to follow the basis that is used for the preparation of the annual financial statements in accordance with the Australian accounting standards.
If additional clarification is required for specific items in this form, reference should be made to the section ‘Instructions for specific items’, which is provided as a guide.
Instructions for specific items
Section A: Large Exposures of a Fund:
Include: Exposures exceeding 1% of Statutory Fund total assets, after adjusting for derivatives.
Column 1: Name of Counterparty
Unlisted or Controlled Investment Entities are to be treated on a look-through basis in accordance with Prudential Standards LPS 2.04 Solvency Standard (LPS 2.04) and LPS 3.04 Capital Adequacy Standard (LPS 3.04) (Section 5.3 in each). The look-through basis should also be consistent with that applied in LRF 300.1 Statement of Financial Position (SF and SF Eliminations).
In the case of exposures to a group of related counterparties, the exposures should be aggregated across the entities in the group by the types of exposure listed in Column 2. Each relevant type of exposure should be reported as a separate row, using the same group name for Column 1 of each row.
Column 2: Type of exposure
Use the drop-down menu to select the appropriate category (as listed from (a) to (m), in the tables contained in paragraphs 10.5.1 of LPS 2.04 and LPS 3.04 into which the particular large exposure falls.
Column 3: Major Asset Class
Use the drop-down menu to select the appropriate asset class of the exposure. This should be consistent with what is reported in LRF 420.0 Assets Backing Policy Liabilities (LRF 420.0).
Column 4-5: Direct/Indirect Exposures to Counterparty
Report the exposure amounts broken down by Direct and Indirect Exposures.
Columns 6: Total Exposure to Counterparty
The Total Exposure is calculated automatically as the sum of Columns 4 and 5.
Column 7: Details of Indirect Holdings
Report the direct holding through which the indirect exposures are held, e.g. the name of the controlled entity, associate or unit trust through which the exposure is held.
Column 8: Inadmissible Amount
Report the amount of the exposure to the counterparty that would contribute to the Inadmissible Assets Reserve in accordance with Sections 10.5 of LPS 2.04 and LPS 3.04.
Section B: Related Party Exposures of a Fund:
Part 1: Related Parties that are Financial Services Entities
Part 2: Other Related Parties
‘Financial Service Entity’ is defined in Prudential Standard LPS 7.02 General Standards.
Column 1: Name of Related Party
Report the names of the relevant individual related entities that the life company has exposures to.
Column 2: Category of Related Party
Select the appropriate category using the drop-down menu:
Subsidiary of Life Company
Related Entity
Parent Entity
Associate
Joint Venture
Other Related Party
Column 3: Major Asset Class
Use the drop-down menu to select the appropriate asset class of the exposure. This should be consistent with what is reported in LRF 420.0.
Column 4: Amount of Exposure
Report the gross exposure amount.
Columns 5-7: Related Party Details
Report the following financial details of the Related Party: Fair Value of net assets, Assets, and Liabilities.
Column 8: Inadmissible Amount
Report the amount of the exposure to the Related Party that would contribute to the Inadmissible Assets Reserve in accordance with LPS 2.04 and LPS 3.04.