Get a plain-English read of Expected Reinsurance Recoveries (6)
Turn the raw legal text into a practical explanation grounded in Financial Sector (Collection of Data) (reporting standard) determination No. 7 of 2010 - GRS 210 (2010) - Insurance Risk Charge.
Expected reinsurance recoveries[11] means any amounts due to an insurer from a reinsurer that arise from the recognition of premiums liabilities referred to in the capital standards[12] and GPS 310. This is distinguished from reinsurance recoverables.
Small insurers[13] may use accounting data as a proxy for APRA reporting purposes in valuing its premiums liabilities and expected reinsurance recoveries on premiums liabilities subject to a liability adequacy test and in applying that test a 75 percent level of sufficiency is used. Where accounting data is used as a proxy, the expected reinsurance recoveries on premiums liabilities amounts should be the amount determined as deferred reinsurance expense under AASB 1023.
Net PL - Central Estimate (7)
For each line of business, report the central estimate, net of expected reinsurance and non-reinsurance recoveries, associated with premiums liabilities that are calculated in accordance with GPS 310.
Net PL - Risk Margin (8)
For each line of business report the risk margin, net of expected reinsurance and non-reinsurance recoveries, associated with premiums liabilities that are calculated in accordance with GPS 310.
PL Net of Non RI Recoveries and Expected RI Recoveries (9)
Total premiums liabilities net of expected reinsurance recoveries and non-reinsurance recoveries is calculated as follows:
total gross premiums liabilities - gross of expected reinsurance and non-reinsurance recoveries; less
expected non-reinsurance recoveries; less
expected reinsurance recoveries.
Do not enter a value as this is automatically calculated by the form.
PL Capital Factor % (10)
This column states the insurance risk capital factor applicable to each line of business. The capital factors are specified in GPS 115.
PL Insurance Risk Charge (11)
This column represents the insurance risk capital charge applicable to each line of business. The capital charge is calculated based on the capital factors specified in GPS 115.
The PL insurance risk charge is automatically calculated; do not enter values. The total of this column for direct business and reinsurance business is included in the calculation of the minimum capital requirement for the insurer.
Part 1B and 2B: Direct and Reinsurance business – AASB 1023 Premiums Liabilities
Unearned Premium Liability (2)
For each line of business, report the UPL, in accordance with the recognition requirements of AASB 1023.
AASB 1023 requires that premium revenue is recognised in accordance with the expected pattern of risk and any unearned portion must be deferred and recognised on the balance sheet.
Deferred Acquisition Costs (3)
For each line of business, report the DAC, in accordance with the recognition requirements of AASB 1023. This should be completed on a best endeavours basis.
(3A) Report the amount of DAC which existed prior to any liability adequacy test (LAT) write-downs in the ‘Before LAT write-down’ sub-column.
(3B) Report the amount of any LAT write-downs in the ‘LAT write-down’ sub-column.
Unexpired risk liability (4)
Report any unexpired risk reserve recognised as a result of performing the LAT in accordance with AASB 1023. This should be completed on a best endeavours basis.
Deferred reinsurance expense (5)
For each line of business report the DRE recognised for the full term of the reinsurance contract.
Other items (6)
Include in this column the net value of any other items which form the total of AASB 1023 net premiums liabilities. This would include:
Deferred reinsurance exchange commission (to be entered as a positive value);
Unearned commission revenue (to be entered as a positive value); and
Deferred levies and charges (to be entered as a negative value).
AASB 1023 Net Premiums Liabilities (7)
This item is automatically calculated by the form and represents Column 2 ‘Unearned Premium Liability’ less Column 3 ‘Deferred Acquisition Costs’ plus Column 4 ‘Unexpired risk liability’ less Column 5 ‘Deferred reinsurance expense’ plus Column 6 ‘Other items’.
Part 1C and 2C: Direct and Reinsurance business – Policies incepting in the following reporting period with a material impact on capital requirements and not otherwise included in the capital requirements.
As described above, and in paragraphs 77 and 78 of GPS 310, any unbooked premium revenue will be subject to the premiums liabilities risk charge.
Report in these parts the net unearned premium revenue for all policies which incept at a date in the following reporting period that will have a material impact on capital requirements, but are not otherwise included in the capital requirements.
This requirement is based on the principles that an insurer should be able to meet its insurance obligations at all times, not just at the quarterly reporting dates. With regards to written contracts for which insurers are not on risk for in the current reporting period, APRA will not define how far into the subsequent reporting period the capital requirement applies. Instead, at the reporting date, insurers are required to hold sufficient capital for all general insurance contracts for which the general insurer is committed, regardless of when / whether the contract incepts. At the reporting date, the insurer is required to report the net premium revenue for contracts that will expose the insurer to material risks in the subsequent reporting period.
Net written premium (2)
Net written premium which is unbooked should be reported as:
Gross unbooked premium
Less:
levies that are included in the Gross Premium and would be payable on the business (in particular FSL); and
Less:
reinsurance costs that would arise in respect of the unbooked premium and would be payable under treaty arrangements to protect the business;
Less:
commission that would be payable to secure the business once it is written (such as brokerage or reinsurance exchange commission).
PL Capital factor % (3)
This column states the insurance risk capital factor applicable to each line of business. The capital factors are specified in GPS 115.
Additional policies risk charge (4)
This column represents the insurance risk capital charge applicable to each line of business. The capital charge is calculated based on the capital factors specified in GPS 115.
The PL insurance risk charge is automatically calculated; by the form do not enter values. The total of this column for direct business and reinsurance business is included in the calculation of the minimum capital requirement for the insurer.