Schedule

Reporting Standard GRS 140.0 (2007) Investments – Direct Interest Rate Holdings and Risk Charge comprises 24 pages commencing on the next page.

Reporting Standard GRS 140.0 (2007)

Investments – Direct Interest Rate 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 140.0 Investments – Direct Interest Rate Holdings and Risk Charge (Form GRF 140.0) the instructions to that form (which are attached and form part of this reporting standard); and
• Prudential Standard GPS 110 Capital Adequacy.

Purpose

1. Data collected in the Form GRF 140.0 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with Prudential Standard GPS 110 Capital Adequacy.

Application and commencement

2. This reporting standard applies to all insurers on and from 1 January 2007.

Information required

3. An insurer must provide APRA with the information required by Form GRF 140.0 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 140.0 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 approved 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 approved 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:

(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b) 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 January 2007 in accordance with the reporting standard that this reporting standard replaced.

Interpretation

17. In this reporting standard:

approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act;

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

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 appropriate, 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 140.0 Investments – Direct Interest Rate Holdings and Risk Charge (Form GRF 140.0) the instructions to that form (which are attached and form part of this reporting standard); and
• Prudential Standard GPS 110 Capital Adequacy.

Purpose

1. Data collected in the Form GRF 140.0 is used by APRA for the purpose of prudential supervision including assessing an insurer’s compliance with Prudential Standard GPS 110 Capital Adequacy.

Application and commencement

2. This reporting standard applies to all insurers on and from 1 January 2007.

Information required

3. An insurer must provide APRA with the information required by Form GRF 140.0 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 140.0 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 approved 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 approved 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:

(a) a form that is part of this reporting standard, and the instructions to such a form, to correct technical, programming or logical errors, inconsistencies or anomalies; or

(b) 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 January 2007 in accordance with the reporting standard that this reporting standard replaced.

Interpretation

17. In this reporting standard:

approved auditor means an auditor who has been approved by APRA under section 40 of the Insurance Act;

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

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 appropriate, 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 GRF 140.0 Investments – Direct Interest Rate 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 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 110 Capital Adequacy. 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 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.

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 140.0 Investments – Direct Interest Rate 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[1] outstanding at the reporting date must be translated at the spot rate[2] at the reporting date.
2. Foreign currency non-monetary items[3] 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 be 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 140.0 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’.

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.[4] 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[5] 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.

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 110 Capital Adequacy.

Investment Risk Charge

This column for each form will calculate the appropriate investment risk charge in accordance with GPS 110 Capital Adequacy.

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; 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 110 Capital Adequacy. 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 are 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 purpose 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

Scope

Do not include loans and advances in this section. These are to be included in the form headed “Loans and Advances”.

Specific disclosure of deposit and security holdings classified into short term and long term securities is required by the ABS.

Definitions/interpretation for specific items

1. Deposits or placements

These primarily include deposits or placements that are of a money market type basis. These may be available on demand (11am accounts, money market or 24-hour money), and must be held as part of the Insurer’s investments portfolio.

Do not include any deposits at call that are used by the Insurer for daily liquidity/operations (i.e. funds that are not specifically included as investment funds). These are to be disclosed as Money at short call in GRF 300.0 Statement of Financial Position.

This information is primarily required by the ABS.

1.1 ADIs

Includes funds lodged with Banks, Credit Unions, Building Societies and other authorised deposit taking institutions (ADIs) as defined below.

1.2 Other

Include placements and money market accounts held with entities other than included in the above classification.

2. Short term securities

The term short term refers to holding of securities with an original term to maturity (as opposed to residual term to maturity), that is equal to or less than 1 year.

Include:

• Bills of Exchange, bank-accepted and other;

• Certificates of deposits;

• Commercial paper;

• Other one name paper; and

• Securities lent or sold under repurchase agreements

Bills of Exchange

2.1 Bank Accepted

Report bills of exchange that are accepted by a Bank.

2.2 Other

Report all other bills of exchange other than bank accepted bills.

Commercial paper and promissory notes Issued by:

The following provides guidelines to facilitate in the disclosure for this return of the counterparty/issuer of interest rate securities held by the insurer. The following specific disclosures are required by the ABS.

2.3 Banks and Authorised Deposit Taking Institutions (ADIs)

Banks refers to ADIs, in relation to which an authority under subsection 9(3) is in force and which hold a consent under section 66 of the Banking Act 1959 (Banking Act) to use the word bank.

Include:

• Development banks; and

• Foreign banks licensed to operate in Australia under the Banking Act.

Exclude:

• Merchant banks (record as Other).

ADIs refer to corporations, which have an authority under subsection 9(3) in force, but which do not hold a consent under section 66 under the Banking Act to use the word bank. These include Building Societies and Credit unions.

Exclude:

Holding of securities issued by Finance Corporations, these are included under Registered Financial Corporations.

2.4 General Insurance Corporations

Includes corporations that provide general insurance (e.g. fire, accident, employer liability, public liability, household, marine).

2.5 Securitisers

These are financial vehicles that issue short and/or long-term securities (called asset-backed securities) using specifically selected assets (e.g. mortgages, receivables). They provide backing (collateral) for the securities and generate the payment streams necessary to fulfil interest and principal requirements for investors. Include holdings of the following:

• Mortgage backed securities; and

• Other asset backed securities (other than mortgage backed).

2.6 Private Trading Corporations

Include Intra group financiers and retailers registered under the Financial Sector (Collection of Data) Act 2001 and parent companies with significant holdings of shares in private trading companies.

2.7 Registered Financial Corporations

Registered Financial Corporations refers to corporations registered under the Financial Sector (Collection of Data) Act 2001 that are classified as Categories D or Other. A list of corporations registered under the Financial Sector (Collection of Data) Act 2001 and their classification are available on the APRA website.

Include:

• Money market corporations (D); and

• Other (formerly categories E, F and G).

Exclude:

• Intra group financiers and retailers registered under Financial Sector (Collection of Data) Act 2001; and
• Cash management trusts (Note: for the purpose of applying the required investment capital charge, cash management trusts are to be reported in GRF 140.4 Investments – Indirectly Held by Insurer and Risk Charge).

2.8 Australian Commonwealth Government Corporations

Trading enterprises owned by the Commonwealth are those businesses, which are owned and controlled by the Australian Commonwealth Government.

Include:

All resident trading enterprises owned 50% or more by the Commonwealth Government or controlled by the Commonwealth Government through legislation, decree or regulation

2.9 Australian Commonwealth Government

Include:

• Treasury notes.

Exclude:

• Treasury bonds (include these in long term securities);

• Government trading enterprises (record as Australian Commonwealth Government corporations);

• Departments of the ACT and Northern Territory Governments (record as Other Australian Government (State, territory and local government); and

• Reserve Bank of Australia and Commonwealth Government financial institutions such as AIDC and EFIC (record as Australian Commonwealth Government Corporations).

2.10 Other Australian Government (State, territory and local government)

State, territory and local governments provide non-market goods and services, principally financed by taxes, to regulate economic activity, maintain law and order and to redistribute income and wealth by means of transfers and hence provided free of charge or at nominal prices well below the cost of production.

2.11 National government of a foreign country:

(i) where the security has a Grade 1 rating or the country's long term foreign currency rating is Grade 1.

This is required by APRA to enable the calculation of the required investment risk charge.

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

(ii) Other

Disclose all other investments in securities issued by the national government of a foreign country which are not reported in (i) above.

2.12 Other

Include securities issued by counterparties other than those specifically listed on the form.

3. Long term debt securities

The term long term refers to holding of securities which have an original term to maturity (as opposed to residual term to maturity), that is greater than 1 year.

Include:

• Commercial paper;

• Other one name paper; and

• Securities lent or sold under repurchase agreements

Long term debt Securities Issued by:

The following provides guidelines to facilitate in the disclosure for this return of the counterparty/issuer of interest rate securities held by the insurer. The following specific disclosures are required by the ABS.

3.1 Banks and Authorised Deposit Taking Institutions (ADIs)

Banks refers to ADIs, in relation to which an authority under subsection 9(3) is in force and which hold a consent under section 66 of the Banking Act to use the word bank.

Include:

• Development banks; and

• Foreign banks licensed to operate in Australia under the Banking Act

Exclude:

• Merchant banks (record as Other).

ADIs refer to corporations, which have an authority under subsection 9(3) in force, but which do not hold a consent under section 66 under the Banking Act to use the word bank. These include Building Societies and Credit unions.

Exclude:

Holding of securities issued by Finance Corporations, these are included under Registered Financial Corporations.

3.2 General Insurance Corporations

Includes corporations that provide general insurance (e.g. fire, accident, employer liability, public liability, household, marine).

3.3 Securitisers

These are financial vehicles that issue short and/or long-term securities (called asset-backed securities) using specifically selected assets (e.g. mortgages, receivables). They provide backing (collateral) for the securities and generate the payment streams necessary to fulfil interest and principal requirements for investors. Include holdings of the following:

• Mortgage backed securities; and
• Other asset backed securities (other than mortgage backed).

3.4 Private Trading Corporations

Include Intra group financiers and retailers registered under the Financial Sector (Collection of Data) Act 2001 and parent companies with significant holdings of shares in private trading companies.

3.5 Registered Financial Corporations

Registered Financial Corporations refers to corporations registered under the Financial Sector (Collection of Data) Act 2001 that are classified as Categories D or Other. A list of corporations registered under the Financial Sector (Collection of Data) Act 2001 and their classification are available on the APRA website.

Include:

• Money market corporations (D); and

• Other (formerly categories E, F and G).

Exclude:

• Intra group financiers and retailers registered under Financial Sector (Collection of Data) Act 2001.
• Cash management trusts (Note: for the purpose of applying the required investment capital charge, cash management trusts are to be reported in the ‘Assets Indirectly Held’ investment form).

3.6 Australian Commonwealth Government Corporations

Trading enterprises owned by the Commonwealth are those businesses, which are owned and controlled by the Australian Commonwealth Government.

Include:

All resident trading enterprises owned 50% or more by the Commonwealth Government or controlled by the Commonwealth Government through legislation, decree or regulation

3.7 Australian Commonwealth Government

Exclude:

• Treasury Notes. Record as short term securities;

• Government trading enterprises (record as Australian Commonwealth Government corporations);

• Departments of the ACT and Northern Territory Governments (record as Other Australian Government (State, territory and local government); and

• Reserve Bank of Australia and Commonwealth Government financial institutions such as AIDC and EFIC (record as Australian Commonwealth Government Corporations).

3.8 Other Australian Government (State, territory and local government)

State, territory and local general government provide non-market goods and services, principally financed by taxes, to regulate economic activity, maintain law and order and to redistribute income and wealth by means of transfers and hence provided free of charge or at nominal prices well below the cost of production.

3.9 National government of a foreign country:

(i) where the security has a Grade 1 rating or the country’s long term foreign currency rating is Grade 1

Disclose the investments in securities issued by the national government of a foreign country with a rating of Grade 1.

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

(ii) Other

Disclose all other investments in securities issued by the national government of a foreign country which are not reported in (i) above.

3.10 Other

Include securities issued by counterparties other than those specifically listed on the form.

Total direct interest rate investments

This item is calculated automatically by the form. It represents the sum of the items 1.1 to 3.10 as listed above.

of which: Investments denominated in a currency other than the Australian currency

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

4. Total direct interest rate investments classified into the following:

4.1 Debt obligations with a Rating Grade of 1 that matures or is redeemable:

• in less than 1 year

• in 1 year or more

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

4.2 Debt obligations with a Rating Grade of 2 that matures or is redeemable:

• in less than 1 year

• in 1 year or more

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

4.3 Debt obligations with a Rating Grade of 3

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

4.4 Debt obligations with a Rating Grade of 4 or are unrated

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

4.5 Debt obligations with a Rating Grade of 5

Refer to GPS 110 Capital Adequacy for further information on classification of rating grades.

5. Total Direct Interest rate investments classified into the following:

5.1 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 interest rate investments that are designated by the Insurer as representing policyholders’ funds (where this is done by the insurer).

5.2 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 interest rate investments designated as representing shareholders funds (where this is done by the insurer).

6. Total Direct Interest rate investments classified into the following:

Deposits/placements with, or debt securities issued by (do not include loans and advances here):

6.1 The reporting Insurer (i.e. holdings in own debt securities)

Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose holdings of debt securities issued by the licensed insurer that are held by the licensed insurer.

6.2 Parent entity

Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities that are issued by the parent entity of the licensed insurer.

6.2.1. 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 interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities that are issued by controlled entities of the licensed reporting insurer.

6.3 Associates/Joint Ventures

Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities that are issued by Associates or Joint Ventures of the licensed insurer. Associates is a reference to associates as defined in the Australian Accounting Standards and is to be read as also applying to joint ventures unless otherwise indicated.

6.4 Other related parties

Of the total direct interest rate investment portfolio of the insurer that is reported as required by this form, disclose any deposits/placements or holdings of debt securities held by the licensed insurer that are issued by any other related entity of the licensed insurer that is not specifically identified above.

7. Total investment risk charge

The total investment risk charge for direct interest rate holdings is automatically calculated.