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Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2006 - Reporting Standard GRS 110.0 (2007) Minimum Capital Requirement
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Turn the raw legal text into a practical explanation grounded in Financial Sector (Collection of Data) (reporting standard) determination No. 63 of 2006 - Reporting Standard GRS 110.0 (2007) Minimum Capital Requirement.
Introduction
This form reports the summary of the risk charges, Minimum Capital Requirement (MCR), the capital base, net assets in Australia, and compliance with the capital requirements as prescribed in GPS 110 Capital Adequacy.
The individual risk charges and capital base summarised on this form are calculated in other forms. The form will automatically calculate the MCR of the reporting insurer based on the information reported for the individual risk charges. Additionally, information relating to the capital surplus/deficiency and capital ratios will be calculated automatically.
This form 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 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. This means that:
the completed form for the financial year must be audited by the approved 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.
The form reports in Australian currency rounded in thousands of dollars (no decimal place). Ratios are expressed to 2 decimal places.
Insurers are required to report the information in the reporting form on a quarterly and annual basis.
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 110.0 Minimum Capital Requirement.
Specific instructions
This represents the total capital charge applicable for the credit substitutes provided by the reporting insurer. This amount is calculated in item titled “Total Off balance sheet required risk charge” in GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This represents the total capital charge applicable for the charges and encumbrances granted by the reporting insurer. This amount is calculated in the item titled “Adjusted required capital charge” in GRF 130.2 Off Balance Sheet Business – Charges Granted and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.1. GRF 140.0 Investments - Direct Interest Rate Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct interest holdings of the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.0 Investments - Direct Interest Rate Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.2. GRF 140.1 Investments - Direct Equity Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct equity holdings of the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.3. GRF 140.2 Investments - Direct Property Holdings and Risk Charge
This represents the total investment risk charge applicable for the direct property holdings of the reporting insurer. This figure is calculated in column headed “Investment Risk Charge” for line item titled “Total direct property investments” in GRF 140.2 Investments - Direct Property Holdings and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.4. GRF 140.3 Investments - Loans and Advances and Risk Charge
This represents the total investment risk charge applicable for the loans and advances provided by the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.3 Investments – Loans and Advances and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.5. GRF 140.4 Investments - Indirectly Held by Insurer and Risk Charge
This represents the total investment risk charge applicable for assets that are indirectly held by the reporting insurer. This amount is calculated in the item titled “Total Investment Risk Charge” in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.6. GRF 300.0 Statement of Financial Position
This represents the total investment risk charge for all applicable assets listed in GRF 300.0 Statement of Financial Position – Licensed Insurer. It excludes assets that are subject to a risk charge under the forms GRF 140.0 – 140.4, GRF 150.0 and assets that are deducted from the Capital Base.
This figure represents the sum of the individual investment risk charges calculated under the column heading “Investment Risk Charge” and is reported for item 15 in GRF 300.0 Statement of Financial Position. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
3.7. Total Investment Risk Charge
This item represents the total investment risk charge. This figure will be automatically calculated by the form.
The investment risk charge may be reduced where the insurer holds certain types of collateral against an asset, or where an asset has been guaranteed, as a means of reducing risk. Accordingly this item represents the ‘rebate’ of the investment risk charge on these assets that is calculated in either GRF 140.0 – GRF 140.4 or GRF 300.0 Statement of Financial Position. The rebate represents the difference between the investment risk capital charge applicable to the value of the eligible collateral or guarantee provided to the insurer and the investment risk capital charge applicable to the asset(s) being supported.
This item is calculated in GRF 130.3 Off Balance Sheet Business - Credit Support Received and represents the sum of “Adjustment to Investment Capital Charge” in ‘Part A - Eligible Collateral Provided to Reporting Insurer’ and ‘Part B - Guarantees Provided to Reporting Insurer’.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This represents the total investment concentration risk charge for exposures listed in GRF 150.0 Asset Exposure Concentrations and Risk Charge. This figure represents the item “Net concentration risk charge” calculated in GRF 150.0 Asset Exposure Concentrations and Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This represents the total investment risk charge for derivative exposures listed in GRF 160.0 Derivatives Activity and Risk Charge. This figure represents the sum of the individual investment risk charges reported in the item titled ‘Risk Charge’ in the GRF 160.0 Derivatives Activity and Risk Charge series. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This represents the total concentration risk charge applicable for the reporting insurer. This figure represents the amount disclosed in item “Total Concentration Risk Charge” in GRF 170.0 Concentration Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This represents the total insurance risk charge applicable in response to the risk that the true value of the net outstanding claims provision (OCP) of an insurer is greater than the value determined under GPS 310 Audit and Actuarial Reporting and Valuation. This figure represents the “Total” line item under the column headed “OCP Insurance Risk Charge” in GRF 210.0 Outstanding Claims Provision - Insurance Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This represents the total insurance risk charge applicable in response to the risk that the true value of the net premiums liabilities of an insurer is greater than the value determined under GPS 310 Audit and Actuarial Reporting and Valuation. This figure represents the “Total” line item under the column headed “Premium Liabilities Insurance Risk Charge” in GRF 210.1 Premium Liabilities - Insurance Risk Charge. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Report the variation in capital charges in this item with a brief description (no more than 200 characters) and the amount of each variation which has been approved by APRA. A reduction in risk charges resulting from variations has to be reported as a negative number while any increase needs to be reported as a positive number.
The total variation is calculated automatically by the form.
This item is automatically calculated by the form.
It represents the sum of the items 1-3 and 5-10 (as reported in GRF 110.0 Minimum Capital Requirement) less item 4 and is calculated as under:
Add
Less
This represents the total eligible capital base of the insurer. This amount is calculated in item titled “Total Capital Base” in GRF 120.0 Determination of Capital Base. This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
This figure represents the value of item titled “GRF 120.0 Determination of Capital Base” less the amount calculated for item titled “Minimum Capital Requirement”.
This figure will be automatically calculated by the form.
This figure represents the value of item titled “GRF 120.0 Determination of Capital Base” divided by the value of item titled “Minimum Capital Requirement”.
This figure will be automatically calculated by the form.
This is another way of looking at the solvency coverage and this figure represents the value of item titled “Minimum Capital Requirement” divided by the value of item titled “GRF 120.0 Determination of Capital Base”.
This figure will be automatically calculated by the form.
‘Adjusted net assets in Australia’ refer to total assets less assets that are excluded as ‘assets in Australia’ for the purpose of section 28 of the Act.
Adjusted Net Assets in Australia are determined as under:
16.1. Net Assets per form GRF 300.0 Statement of Financial Position
If the insurer does not have any business (i.e. assets and liabilities) outside of Australia then the insurer does not have to complete GRF 300.0 Statement of Financial Position (Inside Australia)and only has to complete GRF 300.0 Statement of Financial Position (Licensed Insurer). In this case, the amount reported in item 16.1 “Net Assets” on GRF 110.0 Minimum Capital Requirement must agree to the value of item titled “Net Assets” on GRF 300.0 Statement of Financial Position (Licensed Insurer).
Where the insurer has business outside of Australia and GRF 300.0 Statement of Financial Position (Inside Australia) needs to be completed, the amount reported in item 16.1 “Net Assets” on GRF 110.0 Minimum Capital Requirement must agree to the value of item titled “Net Assets” on GRF 300.0 Statement of Financial Position (Inside Australia).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
Less:
Assets specifically excluded from being considered inside Australia by GPS 120 Assets in Australia.
16.2. Deductions for assets specifically excluded from being considered inside Australia:
16.2.1. Goodwill
This figure represents the value of the following items from GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position;
Less:
Plus:
Plus:
The following item from GRF 140.1 Investments – Direct Equity Holdings and Risk Charge (where it includes amounts inside Australia);
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.2. Other intangible assets
This figure represents the value of the following items from GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position;
Less:
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.3. Deferred Tax Assets (net of any Deferred Tax Liabilities)
Disclose the value of Deferred tax assets (net of any deferred tax liabilities) recognised in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
The amount entered in this field must be either positive or zero, if the result of the netting calculation is a negative, enter zero.
16.2.4. Surplus in defined benefit superannuation plan
Disclose the value of any surplus, net of deferred tax liabilities, in any insurer employer-sponsored defined benefit superannuation fund, unless otherwise approved, in writing, by APRA. Any excluded surplus must reverse any associated deferred tax liability from Tier 1 capital. The amount reported in GRF 110.0 Minimum Capital Requirement must not be greater than the amount reported in items 5.3 plus 13.2 of GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
Deferred Tax Liabilities should not be counted twice in 16.2.3 and at 16.2.4.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.5. Holdings of own Tier 1 capital instruments
Disclose the value of holdings of own Tier 1 capital instruments of the insurer.
16.2.6. Net unrealised fair value gains (losses) from changes in the GI's own credit worthiness
This item only applies to general insurers that have designated their own debt instruments at fair value under the fair value option in AASB 139.
Deduct/(add back) any unrealised fair value gains/(losses) included in Tier 1 capital (before deductions) arising from changes in the reporting general insurer’s own credit worthiness (e.g. reduction in fair value of the general insurer’s outstanding debt due to change in credit rating).
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.7. Net unrealised gains (losses) on effective cash flow hedges
Disclose the value of cumulative fair value gains and losses on effective cash flow hedges reflected in retained earnings or reserves included in Tier 1 capital which do not offset gains or losses on revaluations in reserves included in Tier 1 capital. Deduct the gains on hedges and add back the losses.
16.2.8. Reinsurance recoveries related to reinsurance contracts that do not meet the reinsurance documentation test
The figure for Reinsurance recoveries related to reinsurance contracts that do not meet the reinsurance documentation test represents the value of item 2.4.15 plus item 2.5.5 plus item 7.3.15 plus item 7.4.5 recognised in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.9. Profits on proportional reinsurance treaties for which the underlying risks have not been accepted by the direct insurer and the treaties are subject to the premium receivable deduction
Disclose the profits on proportional reinsurance treaties for which the underlying risks have not been accepted by the direct insurer and the treaties are subject to the premium receivable deduction as specified in GPS 110 Capital Adequacy.
The amount reported in this item should reconcile to item 2.3.12 plus item 7.2.6 reported in GRF 300.0 Statement of Financial Position (Inside Australia), if completed; otherwise the corresponding items from GRF 300.0 Statement of Financial Position.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.2.10. Other deductions
Disclose other deductions such as:
Disclose any negative movement over the amount available in the respective revaluation reserves for the following items, to the extent not already accounted for in current year earnings or retained earnings:
Property not held at fair value;
Investments in subsidiaries not held at fair value; or
Investment in associates, including any excess of the share of losses in associates under equity accounting.
Identified impairment of certain assets
Disclose any identified impairment of an asset not forming part of a class of assets to which an asset revaluation reserve in Upper Tier 2 capital applies and where the impairment has not already been taken into account in the profit and loss.
Disclose the value of own holdings of Upper Tier 2 capital instruments.
Disclose the value of own holdings of Lower Tier 2 capital instruments.
16.2.11. Variation in deduction by other adjustments approved by APRA
Include any additions or reduction in deductions that have been approved by APRA.
16.3. Assets under a fixed or floating charge, mortgage or other security to the extent of the indebtedness secured by the value of those assets.
Such assets are excluded from being considered inside Australia up to the value of the charge/encumbrance. Where the charge over the assets is only given to support the value of insurance liabilities of the insurer, only the excess of the value of the assets charged/encumbered, over the value of the insurance liabilities, is excluded from being considered inside Australia.
This amount represents the total of all items reported in column headed “Excess of Charge Assets over Liabilities Supported” in GRF 130.2 Off Balance Sheet Business - Charges Granted and Risk Charge.
This figure needs to be manually entered into this data field in GRF 110.0 Minimum Capital Requirement.
16.4. Adjusted Net Assets in Australia
This amount is automatically calculated by the form.