Schedule

Reporting Standard GRS 140.2 (2008) Investments – Direct Property Holdings and Risk Charge comprises the 17 pages commencing on the next page.

Reporting Standard GRS 140.2 (2008)

Investments – Direct Property Holdings and Risk Charge

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, the composition of their investments.

This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:

• Form GRF 140.2 Investments – Direct Property Holdings and Risk Charge (GRF 140.2) and the instructions to that form (which are attached and form part of this reporting standard); and
• any prudential standards referenced in the attached instructions.

Purpose

1. Data collected Form GRF 140.2 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with the capital standards [1].

Application and commencement

2. This reporting standard applies to all insurers on the date of registration of this instrument on the Federal Register of Legislative Instruments.

Information required

3. An insurer must provide APRA with the information required by Form GRF 140.2 for each reporting period.

Forms and method of submission

4. The information required by this reporting standard must be given to APRA either:

(a) in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or

(b) by manually completing Form GRF 140.2 on paper and mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales.

Where the information is submitted by means of an agent to whom the insurer has outsourced the function of providing the information on the insurer’s behalf, the agent may only provide the information in accordance with subparagraph 4(b) if the agent has contacted APRA and advised that the agent cannot submit the information in electronic form under subparagraph 4(a).

Note: the Direct to APRA application software and paper forms may be obtained from APRA.

Reporting periods and due dates

5. Subject to paragraph 6, an insurer must provide the information required by this reporting standard:

(a) in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and

(b) in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.

Note: The annual information required by paragraph 3 read with subparagraph 5(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards.

6. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:

(a) more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or

(b) less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 5(a) or (b)).

7. The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:

(a) in the case of the quarterly information required by subparagraph 5(a) – 20 business days after the end of the reporting period to which the information relates; and

(b) in the case of the annual information required by subparagraph 5(b) – 4 months after the end of the reporting period to which the information relates.

Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate in relation to the annual information required by paragraph 3 read with subparagraph 5(b) must be provided to APRA by the time specified in subparagraph 7(b) of this reporting standard (unless an extension is granted under paragraph 8).

8. APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

9. The information provided by an insurer under this reporting standard must be the product of processes and controls that have been reviewed and tested by the appointed auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the appointed auditor to form an opinion on the accuracy and reliability of the data.

10. The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.

Authorisation

11. If the officer of an insurer provides the information required by this reporting standard:

(a) under subparagraph 4(a), the officer must digitally sign, authorise and encrypt the information (for which purpose APRA’s certificate authority will issue digital certificates, for use with the ‘Direct to APRA’ application, to officers of the insurer who have authority from the insurer to transmit data to APRA); or

(b) under subparagraph 4(b), the completed form must be signed in accordance with paragraph 13.

12. If an insurer provides the information required by this reporting standard through an agent under either subparagraph 4(a) or (b), the agent will not be required to sign or authorise the information. However, the insurer must:

(a) obtain from the agent a paper copy of the completed form as provided to APRA (whether it was provided under subparagraph 4(a) or (b)); and

(b) cause the paper copy to be signed in accordance with paragraph 13; and

(c) lodge the signed paper copy with APRA by mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales, by the relevant due date (unless APRA, in writing, waives the requirement to lodge the signed paper copy with APRA by varying this reporting standard in relation to the insurer).

Note: APRA may, for example, determine to waive the requirement under subparagraph 12(c) where an insurer has undertaken to retain the signed copy of the completed form for an agreed period of time.

13. If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:

(a) the Principal Executive Officer of the insurer; or

(b) the Chief Financial Officer of the insurer (whatever his or her official title may be).

Minor alterations to forms and instructions

14. APRA may make minor variations to the instructions to a form, to clarify their application to the form without changing any substantive requirement in the form or instructions.

15. If APRA makes such a variation it must notify insurers in writing.

Transition

16. An insurer must report in relation to a reporting period ending prior to 1 July 2008 in accordance with the reporting standard that this reporting standard replaced.

Interpretation

17. In this reporting standard:

appointed auditor means an auditor appointed under paragraph 39(1)(a) of the Insurance Act;

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;

capital standards means the prudential standards which relate to capital adequacy as defined in Prudential Standard GPS 001 Definitions;

foreign insurer means a foreign general insurer within the meaning of the Insurance Act;

Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.

Insurance Act means the Insurance Act 1973;

insurer means a general insurer within the meaning of the Insurance Act;

Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.

Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;

reporting period means a period mentioned in subparagraph 5(a) or (b) or, if applicable, paragraph 6.

18. A reference to a prudential standard means the prudential standard, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it.

Objective of this reporting standard

This reporting standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001 (the Collection of Data Act). It requires general insurers (insurers), including foreign general insurers (foreign insurers) operating in Australia through branch operations, to report to APRA, generally on a quarterly and annual basis, the composition of their investments.

This reporting standard outlines the overall requirements for the provision of this information to APRA. It should be read in conjunction with:

• Form GRF 140.2 Investments – Direct Property Holdings and Risk Charge (GRF 140.2) and the instructions to that form (which are attached and form part of this reporting standard); and
• any prudential standards referenced in the attached instructions.

Purpose

1. Data collected Form GRF 140.2 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with the capital standards [1].

Application and commencement

2. This reporting standard applies to all insurers on the date of registration of this instrument on the Federal Register of Legislative Instruments.

Information required

3. An insurer must provide APRA with the information required by Form GRF 140.2 for each reporting period.

Forms and method of submission

4. The information required by this reporting standard must be given to APRA either:

(a) in electronic form using the ‘Direct to APRA’ application, applying one of the electronic submission mechanisms under that application; or

(b) by manually completing Form GRF 140.2 on paper and mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales.

Where the information is submitted by means of an agent to whom the insurer has outsourced the function of providing the information on the insurer’s behalf, the agent may only provide the information in accordance with subparagraph 4(b) if the agent has contacted APRA and advised that the agent cannot submit the information in electronic form under subparagraph 4(a).

Note: the Direct to APRA application software and paper forms may be obtained from APRA.

Reporting periods and due dates

5. Subject to paragraph 6, an insurer must provide the information required by this reporting standard:

(a) in respect of each quarter based on the financial year (within the meaning of the Corporations Act 2001) of the insurer; and

(b) in respect of each financial year (within the meaning of the Corporations Act 2001) of the insurer.

Note: The annual information required by paragraph 3 read with subparagraph 5(b), together with certain annual information required by other reporting standards, will form part of the insurer’s yearly statutory accounts within the meaning of section 3 of the Insurance Act 1973 (the Insurance Act). This means that the information must be audited in accordance with paragraph 49J(1)(a) of the Insurance Act. Under subsection 49J(3), the auditor must give the insurer a certificate relating to the yearly statutory accounts, and that certificate must specify the matters provided for in the prudential standards.

6. APRA may, by notice in writing, change the reporting periods, or specified reporting periods, for a particular insurer to require it to provide the information:

(a) more frequently (if, having regard to the particular circumstances of the insurer, APRA considers it necessary or desirable to obtain information more frequently for the purposes of the prudential supervision of the insurer); or

(b) less frequently (if, having regard to the particular circumstances of the insurer and the extent to which it requires prudential supervision, APRA considers it unnecessary to require the insurer to provide the information as frequently as provided by subparagraph 5(a) or (b)).

7. The information required by paragraph 3 of this reporting standard from an insurer must be provided to APRA by the following times:

(a) in the case of the quarterly information required by subparagraph 5(a) – 20 business days after the end of the reporting period to which the information relates; and

(b) in the case of the annual information required by subparagraph 5(b) – 4 months after the end of the reporting period to which the information relates.

Note: Paragraph 49L(1)(a) of the Insurance Act provides that the auditor’s certificate required under subsection 49J(3) of that Act must be lodged with APRA in accordance with the prudential standards. The prudential standards provide that the certificate must be submitted to APRA together with the yearly statutory accounts. Accordingly, the auditor’s certificate in relation to the annual information required by paragraph 3 read with subparagraph 5(b) must be provided to APRA by the time specified in subparagraph 7(b) of this reporting standard (unless an extension is granted under paragraph 8).

8. APRA may grant an insurer an extension of a due date in writing, in which case the new due date for the provision of the information will be the date on the notice of extension.

Quality control

9. The information provided by an insurer under this reporting standard must be the product of processes and controls that have been reviewed and tested by the appointed auditor of the insurer. This will require the auditor to review and test the systems, processes and controls supporting the reporting of the information to ensure that they produce accurate data and are otherwise reliable. This review and testing must be done on an annual basis or more frequently if necessary to enable the appointed auditor to form an opinion on the accuracy and reliability of the data.

10. The information provided by an insurer under this reporting standard must be subject to processes and controls developed by the insurer for the internal review and authorisation of that information. It is the responsibility of the board and senior management of the insurer to ensure that an appropriate set of policies and procedures for the authorisation of data submitted to APRA is in place.

Authorisation

11. If the officer of an insurer provides the information required by this reporting standard:

(a) under subparagraph 4(a), the officer must digitally sign, authorise and encrypt the information (for which purpose APRA’s certificate authority will issue digital certificates, for use with the ‘Direct to APRA’ application, to officers of the insurer who have authority from the insurer to transmit data to APRA); or

(b) under subparagraph 4(b), the completed form must be signed in accordance with paragraph 13.

12. If an insurer provides the information required by this reporting standard through an agent under either subparagraph 4(a) or (b), the agent will not be required to sign or authorise the information. However, the insurer must:

(a) obtain from the agent a paper copy of the completed form as provided to APRA (whether it was provided under subparagraph 4(a) or (b)); and

(b) cause the paper copy to be signed in accordance with paragraph 13; and

(c) lodge the signed paper copy with APRA by mailing the completed form to APRA’s head office at Level 26, 400 George Street, Sydney, New South Wales, by the relevant due date (unless APRA, in writing, waives the requirement to lodge the signed paper copy with APRA by varying this reporting standard in relation to the insurer).

Note: APRA may, for example, determine to waive the requirement under subparagraph 12(c) where an insurer has undertaken to retain the signed copy of the completed form for an agreed period of time.

13. If information under this reporting standard is provided in paper form, it must be signed on the front page of the relevant completed form by either:

(a) the Principal Executive Officer of the insurer; or

(b) the Chief Financial Officer of the insurer (whatever his or her official title may be).

Minor alterations to forms and instructions

14. APRA may make minor variations to the instructions to a form, to clarify their application to the form without changing any substantive requirement in the form or instructions.

15. If APRA makes such a variation it must notify insurers in writing.

Transition

16. An insurer must report in relation to a reporting period ending prior to 1 July 2008 in accordance with the reporting standard that this reporting standard replaced.

Interpretation

17. In this reporting standard:

appointed auditor means an auditor appointed under paragraph 39(1)(a) of the Insurance Act;

business days means ordinary business days, exclusive of Saturdays, Sundays and public holidays;

capital standards means the prudential standards which relate to capital adequacy as defined in Prudential Standard GPS 001 Definitions;

foreign insurer means a foreign general insurer within the meaning of the Insurance Act;

Note: A reference to a ‘branch’ or ‘branch operation’ is a reference to the Australian operations of a foreign insurer.

Insurance Act means the Insurance Act 1973;

insurer means a general insurer within the meaning of the Insurance Act;

Note: In the forms and instructions, a reference to an ‘authorised insurer’, ‘authorised insurance entity’ or ‘licensed insurer’ is a reference to an insurer, and a reference to an ‘authorised reinsurance entity’ is a reference to an insurer whose business consists only of undertaking liability by way of reinsurance.

Principal Executive Officer means the principal executive officer of the insurer for the time being, by whatever name called, and whether or not he or she is a member of the governing board of the insurer;

reporting period means a period mentioned in subparagraph 5(a) or (b) or, if applicable, paragraph 6.

18. A reference to a prudential standard means the prudential standard, made under section 32 of the Insurance Act, mentioned in the reference, as amended from time to time. If the prudential standard has been revoked and replaced, the reference shall be taken to be to the prudential standard that has replaced it.

Instruction Guide

Introduction

This instruction guide is designed to assist in the completion of the GRF 140.2 Investments – Direct Property Holdings and Risk Charge.

Information on this form will be used by APRA to obtain an investment profile of the reporting insurer and to calculate in part the prudential Investment Risk Capital Charge. Specific information in these forms will also be used by the Australian Bureau of Statistics (ABS) for statistical purposes.

For the purposes of completing the respective investment forms, only include investments that are included in the aggregate balance disclosed for the asset item titled “Investments (related to GRF 140 series of forms)” designated as a current and non-current asset on GRF 300.0 Statement of Financial Position. Do not include in these investment forms asset items reported in any of the other asset categories in GRF 300.0 Statement of Financial Position (e.g. “Other investments”). Otherwise the asset items will be subject to two investment risk charges, one in GRF 300.0 Statement of Financial Position and another in the respective investment forms.

Investment Risk Charge

The Investment Risk Charge applicable for an insurer’s (and reinsurer’s) on-balance sheet Investment/Asset exposures is calculated in accordance with GPS 114 Capital Adequacy: Investment Risk Capital Charge (GPS 114). The form categorises assets into investment capital factor groupings to calculate the applicable investment risk capital charge for each asset category. The aggregate Investment risk charge calculated is included in the calculation of the insurer’s minimum capital requirement.

The fair value of each applicable asset/asset category is required to be disclosed into the appropriate cell for each column titled “Fair Value”.

The Investment Risk Charge is calculated based on the fair value of assets disclosed.

Audit requirements

The form relating to authorised insurance entities and reinsurance entities 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 Appointed 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.

Reporting entity

This form is to be completed by:

1. Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
2. Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
3. Authorised reinsurance entities (reference to licensed insurer in the form means total operations of the licensed entity).

Definitions

Definitions for data reporting items required by this form have been provided where possible in the instructions under the section headed ‘Specific Instructions’.

Unit of measurement

GRF 140.2 Investments – Direct Property Holdings and Risk Charge 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’.

The general requirements of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ for translation are:

1. Foreign currency monetary items[2] outstanding at the reporting date must be translated at the spot rate[3] at the reporting date.
2. Foreign currency non-monetary items[4] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
3. Foreign currency non-monetary items that are measured at fair value will bee translated at the exchange rate at the date when fair value was determined.

Transactions arising under foreign currency derivative contracts at the reporting date must be prepared in accordance with AASB 139 ‘Financial Instruments: Recognition and Measurement’. However, those foreign currency derivatives that are not within the scope of AASB 139 ‘Financial Instruments: Recognition and Measurement’ (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.

For APRA purposes equity items must be translated using the foreign currency exchange rate at the date of investment or acquisition. Post acquisition changes in equity are required to be translated on the date of the movement.

As foreign currency derivatives are measured at fair value, the currency derivative contracts are translated at the spot rate at the reporting date.

Exchange differences should be recognised in profit and loss in the period which they arise. For foreign currency derivatives, the exchange differences would be recognised immediately in profit and loss if the hedging instrument is a fair value hedge. For derivatives used in a cash flow hedge, the exchange differences should be recognised directly in equity.

The ineffective portion of the exchange differences in all hedges would be recognised in profit and loss.

4. Translation of financial reports of foreign operations.

A foreign operation is defined in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ as meaning an entity that is a subsidiary, associate, joint venture or branch of a reporting entity, the activities of which are based or conducted in a country or currency other than those of the reporting entity.

• Exchange differences relating to foreign currency monetary items that form part of the net investment of an entity in a foreign operation, must be recognised as a separate component of equity.
• Translation of financial reports should otherwise follow the requirements in AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’.

Reporting period

Insurers are required to report the information in the reporting form on a quarterly and annual basis.

• The quarterly information is to be completed in respect of each quarter based on the financial year of the insurer, not the calendar year.
• The annual information is to be completed in respect of the financial year of the insurer.
• 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 insurer.

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 140.2 Investments – Direct Property 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’.

The aggregate value of investments disclosed in the forms listed below must agree to the total of amounts reported as both current and non-current assets in items 3 and 8 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 notion of activities integral to insurance operations for its regulatory reporting.[5] APRA does not follow the classification basis in AASB 1023 ‘General Insurance Contracts’. Therefore, the value of these investments reported in this form (and all the above forms) may or may not equate to the value of investments deemed to be assets backing insurance liabilities. For APRA regulatory reporting purposes, investments integral to the entity's general insurance activities means[6] investments that are controlled by the entity in the conduct of its general insurance activities.

Investments reported in this form (and other forms listed above) that are integral to the entity's general insurance activities must be measured at fair value. These investments must not be valued at cost. Fair value has the same meaning as defined in the AASB 132 ‘Financial Instruments: Presentation’, 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 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 except for derivates used to hedge exposures in listed equities. Derivatives over listed equities are to be reported in GRF 140.1 Investments – Direct Equity holdings and Risk Charges.

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 Standards AASB 116 ‘Property, Plant and Equipment’ does not apply and no revaluation reserve should be recognised in the balance sheet with such investments.

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 funds advised asset allocation.

• Holding must be disclosed as unlisted or listed units.

Exception

If the units are held in a related/controlled 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 to 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

Treatment is to be consistent with AASB 139 ‘Financial Instruments: Recognition and Measurement’.

Where the transferee of the security effectively receives a lender’s rate of return, or a return that does not correlate with ownership of the securities (i.e. the risks and rewards of ownership of the underlying securities is not effectively transferred), these transactions are to be accounted for as collateralised borrowing or lending activities.

Under this method of accounting for transactions that satisfy the above, do not adjust (i.e. increase or decrease) the physical Investment security holdings/portfolios (interest rate and equity investments) for the securities that are subject to these agreements. For the required prudential treatment for securities meeting the above conditions, refer to treatment as noted in the instructions for GRF 300.0 Statement of Financial Position.

Securities Transacted not Settled (i.e. trade date accounting)

For the purposes of the APRA forms include market related securities that are recorded on a trade date basis and transacted in accordance with accepted financial market settlements periods. Such securities are to be included in the respective investments forms. These do not constitute forward asset purchases for the purposes of GRF 130.0 Off Balance Sheet Business – Credit Substitutes Provided and Risk Charge.

Related parties

Where this term is used or referenced in these forms, related parties is to be interpreted consistently with its definition and meaning as contained in AASB 124 ‘Related Party Disclosures’.

In accordance with AASB 124, related party means a party that directly or indirectly through one or more intermediaries:

(a) controls, is controlled by or is under common control with, the entity (this includes parents, subsidiaries and fellow subsidiaries);

(b) has significant influence over the entity or has joint control over the entity; or

(c) is an associate (as defined in AASB 128 ‘Investments in Associates’) of the entity; or

(d) is a joint venture in which the entity is a venturer (see AASB 131 ‘Interests in Joint Ventures’); or

(e) is a member of the key management personnel of the entity or its parent; or

(f) is a close member of the family of any individual referred to in (a), (b) or (e); or

(g) is an entity that its controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (e) or in (f); or

(h) is a post-employment benefit plan for the benefit of the employees of the entity, or of any entity that is a related party of the entity.

Specific instructions

Definitions/interpretation for specific items

The following provides guidelines to facilitate in the specific disclosure of property investments held by the insurer.

Property Exposure

For prudential reporting purposes, a property exposure/investment exists where the investment (earnings and capital value) are dependent on the cash flows generated by the property through sale or rental income. Investments in property denominated in a currency other than Australian currency must also be reported on this form.

Property exposure that is to be reported on this form, only relates to exposure to direct holdings of property (direct investment/ownership in freehold or leasehold real estate).

Following property exposures are not to be to be reported on this form, but in GRF 140.4 Investments – Indirectly Held by the Insurer and Risk Charge:

• Holding in listed property trusts

Indirect ownership of physical real estate. Units are listed and traded on the primary board of a recognised stock exchange.

• Holding in unlisted property trusts

Indirect ownership of physical real estate. Units are not listed and traded on the primary board of a recognised stock exchange.

Property Classifications

For this return the insurer’s exposure/investment in direct property, is to be classified according to the following type of property market/categories:

1. Office;
2. Retail – e.g. includes retail shops, restaurants, shopping centres;
3. Tourism and leisure – e.g. includes hotels, motels and lodgings, recreational and sporting facilities, hotel developments, time-share developments and other hospitality industries;
4. Infrastructure; and
5. Other

Fair Value

Fair value must be used for the measurement of the carrying value of the direct property investments/holdings.

Investment Capital Factor %

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

Investment risk charge

This column will automatically calculate the appropriate investment risk charge in accordance with GPS 114.

Total direct property investments

This is automatically calculated by the form and represents the sum of fair value of all property investments of the insurer.

1. Total direct property investments, which represent the following:

1.1 Current Assets

Disclose that component of the total direct property investments of the insurer that are classified as current assets for Australian financial reporting purposes. Disclosure of investments in GRF 300.0 Statement of Financial Position into current assets is to be disclosed/reported in accordance with AASB 101 ‘Presentation of Financial Statements’.

1.2 Non-Current Assets

Disclose that component of the total direct property investments of the insurer that are classified as non-current assets for Australian financial reporting purposes. Disclosure of investments in GRF 300.0 Statement of Financial Position into non-current assets is to be disclosed/reported in accordance with AASB 101 ‘Presentation of Financial Statements’.

The total of item 1.1 and 1.2 must equal ‘Total direct property investments’ reported above.

1.3 Policyholders Funds

Policyholders funds is also referred to as ‘technical reserves/funds’. Use of the term does not imply ownership of these funds by policyholders, like under life insurance. The term is used particularly in establishing the investment management mandates to reflect the different cashflow/risk and return requirements from that of shareholders funds. Disclose the aggregate balance of direct property investments that are designated by the insurer as representing policyholders funds (where this is done by the insurer).

1.4 Shareholders funds

Where the insurer has established the investment management mandates along these terms to reflect the different cashflow/risk and return requirements of shareholders funds from policyholders funds/technical reserves, disclose the aggregate balance of direct property investments designated as representing shareholders funds (where this is done by the insurer).

2. Total direct property investments classified into the following:

2.1 Investments denominated in a currency other than the Australian currency

Disclose the aggregate balance of property investments that are denominated in a currency other than the Australian currency.

2.2 Investment/holdings of direct property purchased from:

2.2.1. Parent entity

Of the total direct property investments of the insurer that is reported in this form, disclose direct holdings of property purchased from the parent entity of the licensed insurer.

2.2.1.1. Controlled entities/Controlled entities of the parent entity

For branches, the line item “Controlled entities/Controlled entities of the parent entity” is to be interpreted as amounts in relation to “Controlled entities of the parent entity”, and for licensed insurance entities amounts are in relation to “Controlled entities” of the reporting insurer.

Of the total direct property investments of the insurer that is reported in this form, disclose direct holdings of property purchased from controlled entities of the reporting insurer.

2.2.2. Associates/Joint Ventures

Of the total direct property investments of the insurer that is reported in this form, disclose direct holdings of property purchased from Associates or Joint Ventures of the reporting insurer. Associates and Joint Ventures are defined in accordance with AASB 131 ‘Interests in Joint Ventures’ and AASB 128 ‘Investments in Associates’.

2.2.3. Other related parties

Of the total direct property investments of the insurer that is reported in this form, disclose direct holdings of property purchased from any other related party of the reporting insurer, that are not specifically reported in other categories of related parties listed. Refer to the definition of related parties as defined in the general section of this instruction guide.