Reporting lagReporting lag

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 140.0 Investments – Direct Interest Rate Holdings and Risk Charge.

Basis of preparation

In completing this form unless otherwise specifically stated below, it is recommended that general insurers follow the Australian accounting standards where possible, regarding the interpretation, recognition and measurement of investments notably AASB 1023 ‘General Insurance Contracts’ (AASB 1023).

The aggregate value of investments disclosed in the forms listed below must agree to the amount reported in items 3 of GRF 300.0 Statement of Financial Position.

• GRF 140.0 Investments – Direct Interest Rate Holdings and Risk Charge

• GRF 140.1 Investments – Direct Equity Holdings and Risk Charge

• GRF 140.2 Investments – Direct Property Holdings and Risk Charge

• GRF 140.3 Investments – Loans and Advances and Risk Charge

• GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge

APRA applies the fair value approach to measurement of assets backing general insurance liabilities for its regulatory reporting which is consistent with the classification basis in AASB 1023 and the present value measurement approach for general insurance liabilities. The value of the investments reported in this form (and all the above forms) should be equal to the value of investments deemed to be assets backing insurance liabilities for statutory reporting purposes.

Investments reported in this form (and other forms listed above) that back the entity's general insurance liabilities must be measured at fair value. These investments must not be valued at cost. Fair value has the same meaning as defined in AASB 139, that is, the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's-length transaction, and is determined as follows:

1. The quoted market price (i.e. bid or ask price) in an active and liquid market; or
2. When there is infrequent activity in a market, and the market is not well established, small volumes are traded relative to the asset or liability to be valued, or a quoted market price is not available – a realistic estimate of fair value on the basis of the results of a valuation technique that makes maximum use of market inputs, and relies as little as possible on entity-specific inputs.[6]

Derivative instruments that are used to hedge investments (other than for listed equity investments) that are included in the above forms are not to be reported in these forms, they are to be reported in GRF 160.0 Derivatives Activity and Risk Charge.

For investments reported in this form, changes in the values at which such investments are measured must be recognised as revenues (or losses) in GRF 310.0 Statement of Financial Performance and GRF 310.3 Investment and Operating Income and Expense in the reporting period in which the changes occur.

Accounting Standard AASB 116 ‘Property, Plant and Equipment’ does not apply to such investments.

Investment Capital Factor %

This column for each form discloses the appropriate investment capital factor for the asset type in accordance with GPS 114.

Investment Risk Charge

This column for each form will calculate the appropriate investment risk charge in accordance with GPS 114.

Holding of Units in Unit Trusts

Where the insurer’s investments are represented by holdings of units in unlisted or listed managed investment vehicles/entities, the following reporting is required:

• Units are to be reported in GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge. This form requires amongst other things, disclosure of the value of the unit holding according to the nature of the underlying market exposure (i.e. interest rate related, equity related, property related). If the units are held in a diversified or balanced trust, the investment holding is to be disclosed in accordance with the fund’s advised asset allocation; and

• Holding must be disclosed as unlisted or listed units.

Exception

If the units are held in a related entity of the insurer (i.e. a dedicated investment management entity for the Insurer), the Insurer may apply to APRA to have such entities approved as part of its Extended Licensed Entity (ELE). This is set out in GPS 114. Once approved by APRA this will allow the insurer to look through the legal structures involved and consolidate the balance sheet of the related entity with its own for the purposes of determining the Investment Risk Capital Charge. If the insurer has an approved ELE, the underlying individual securities/investments supporting the units held by the licensed insurer are to be disclosed in the investment returns.

Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing