This instruction guide is designed to assist in the completion of GRF 210.1A_G Premiums Liabilities – Insurance Risk Charge – Australia by class of business (Level 2 Insurance Group) (GRF 210.1A_G).
The form can be used to calculate the risk capital charge associated with the Level 2 insurance group’s premiums liabilities in accordance with Prudential Standard GPS 111 Capital Adequacy: Level 2 Insurance Groups (GPS 111).
Audit requirements
The annual return of GRF 210.1A_G required under paragraphs 3(a) and 5(c) of Reporting Standard GRS 210.1_G Premiums Liabilities – Insurance Risk Charge (GRS 210.1_G) must be subject to a limited assurance[1] review by the Group Auditor (see Prudential Standard GPS 311 Audit and Actuarial Reporting and Valuation: Level 2 Insurance Groups (GPS 311)).
The Group Auditor must prepare a review report on the basis of a limited assurance engagement in accordance with the requirements of GPS 311. Assurance in the review report will be provided in the form of negative assurance. To express negative assurance in the review report, the auditor will use limited procedures to obtain sufficient appropriate evidence. Enquiries of the Level 2 insurance group’s staff and analytical procedures will be the primary tools used to obtain evidence. These procedures will not provide all the evidence that would be required in an audit.
The scope and nature of audit testing required is outlined in the Standard on Assurance Engagement ASAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information issued by the Auditing and Assurance Standards Board.
Reporting entities
GRF 210.1A_G is to be completed by the parent entity of a Level 2 insurance group as defined in Prudential Standard GPS 001 Definitions (GPS 001) where the Level 2 insurance group does not have a reporting adjustment under paragraph 3(b) of GRS 210.1_G to report on an ‘Australia by region’ rather than ‘Australia by class of business’ basis. If the Level 2 insurance group has a reporting adjustment under paragraph 3(b) of GRS 210.1_G, it must complete GRF 210.1B_G Premiums Liabilities – Insurance Risk Charge – Australia by region (Level 2 Insurance Group) (GRF 210.1B_G).
Consolidation at Level 2 should cover the Level 2 insurance group as defined under GPS 001.
Definitions
For Australian business[2], report insurance business as per APRA-authorised insurer reporting. For international business[3], only report insurance business deemed to be general insurance business.[4] For prudential reporting purposes ‘Level 1 Insurer’ is as defined in GPS 001.
Other definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific instructions’.
Limited Risk Transfer Arrangements
For Australian business a Limited Risk Transfer Arrangement that is approved by APRA as a reinsurance arrangement must be treated accordingly by the Level 2 insurance group for prudential purposes. A Limited Risk Transfer Arrangement that is approved by APRA as a financing arrangement must be accounted for by the Level 2 insurance group so that the arrangement will not misrepresent, or is not designed to disguise, a material risk to the Level 2 insurance group’s current or continuing profitability, solvency or capital adequacy from any party.
The terms and conditions of the financing arrangement will determine the appropriate accounting treatment for prudential purposes.
Where APRA determines that a Limited Risk Transfer Arrangement is to be treated as a financing arrangement, the Level 2 insurance group must not treat the arrangement as reinsurance for the purpose of determining the minimum capital requirement under GPS 111 or as reinsurance for any other purpose.
For international business, while APRA will not be approving the arrangements, APRA expects the Level 2 insurance group to account for a Limited Risk Transfer Arrangement in a manner consistent with APRA’s expectations under Prudential Standard GPS 221 Risk Management: Level 2 Insurance Groups.
Unit of measurement
This form is to be presented in Australian dollars (AUD), rounded to thousands of dollars, with no decimal place.
Amounts denominated in foreign currency are to be converted to AUD in accordance with Australian accounting standards.
Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with Australian accounting standards.
Materiality
GRF 210.1A_G is to be prepared based on the concept of materiality as applied in Australian accounting standards subject to APRA’s discretion. APRA’s discretion is likely to apply in instances where the application of materiality criteria is not suitable for prudential reporting purposes.
Reporting period
Level 2 insurance groups are required to report the information in the reporting form. This information is to be reported on three occasions in a Level 2 insurance group’s financial year. A Level 2 insurance group is required to submit:
- semi-annual return which is to be completed in respect of each half year from the start of the financial year of the Level 2 insurance group; and
- an audited annual return which will be based on a limited assurance review by the Group Auditor (see Audit requirements).
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 Level 2 insurance group.