Get a plain-English read of Premiums Liabilities — Insurance Risk Ch
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.
This instruction guide is designed to assist in the completion of GRF 210.1 - Premiums Liabilities – Insurance Risk Charge.
The form can be used to calculate the risk capital charge associated with the licensed insurer’s premiums liabilities in accordance with Prudential Standard GPS 115 Capital Adequacy: Insurance Risk Capital Charge (GPS 115).
The value of the premiums liabilities and the expected reinsurance recoveries that are included in this form must be measured in accordance with GPS 310 Audit and Actuarial Reporting and Valuation (GPS 310).
The purpose of this form is to provide detailed information on the following:
Unearned premium liability (UPL), deferred acquisition costs (DAC), deferred reinsurance expense (DRE), unexpired risk liability (URL) and premiums liabilities (PL) by class of business (direct business and reinsurance);
Total UPL, DAC, DRE, URL and premiums liabilities for insurance business written either directly by the insurer or by inward reinsurance;
Central estimate of premiums liabilities both gross and net of expected reinsurance and non-reinsurance recoveries;
Risk margin for premiums liabilities (in accordance with GPS 310) net of expected reinsurance and non-reinsurance recoveries;
The amount of DRE which relates to current reinsurance arrangements that cover future business that has not yet been written; and
The surplus or deficit between the premiums liabilities held under AASB 1023 ‘General Insurance Contracts’ (AASB 1023) and GPS 310.
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 Standards Board 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 (the Act). 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)); and
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 entities
This form is to be completed by:
Branch insurers of a foreign parent insurer (reference to licensed insurer in the form means total operations of the branch, excluding the parent operations);
Authorised insurance entities, including mutual entities (reference to licensed insurer in the form means total operations of the licensed entity); and
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
This form is to be prepared in thousands of Australian dollars (AUD). Amounts denominated in a currency other than Australian currency are to be converted to AUD in accordance with AASB 121 ‘The Effects of Changes in Foreign Exchange Rates’ (AASB 121).
The general requirements of AASB 121 for translation are:
Foreign currency monetary items[6] outstanding at the reporting date must be translated at the spot rate[7] at the reporting date.
Foreign currency non-monetary items[8] that are measured at historical cost in a foreign currency must be translated using the exchange rate at the date of the transaction.
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’ (AASB 139). However, those foreign currency derivatives that are not within the scope of AASB 139 (e.g. some foreign currency derivatives that are embedded in other contracts) remain within the scope of AASB.
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.
Translation of financial reports of foreign operations.
A foreign operation is defined in AASB 121 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.
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 210.1 Premium Liabilities – Insurance Risk Charge.
Specific instructions
Classes of Business (1)
Direct Business
The classes of insurance business are as follows:
(I). Houseowners/householders (H & H)
This class covers the common H & H policies inclusive of:
Contents;
Personal property;
Arson; and
Burglary.
Public liability normally attaching to these products is to be separated and included in the Public and product liability class of business – item (l).
(II). Commercial motor vehicle
Motor vehicle insurance (including third party property damage) other than insurance covering vehicles defined below under Domestic motor vehicle. It includes long and medium haul trucks, cranes and special vehicles and policies covering fleets.
(III). Domestic motor vehicle
Motor vehicle insurance (including third party property damage) covering private use motor vehicles including utilities and lorries, motor cycles, private caravans, box and boat trailers and other vehicles not normally covered by business or commercial policies.
(IV). Travel
Insurance against losses associated with travel including loss of baggage and personal effects, losses on flight cancellations and overseas medical costs.
(V). Fire and Industrial Special Risks (ISR)
Fire
Includes all policies normally classified as 'Fire' and includes:
sprinkler leakage;
subsidence;
windstorm;
hailstone;
crop;
arson; and
loss of profits and any extraneous risk normally covered under fire policies, e.g. flood.
ISR
Standard policy wordings exist for this type of policy. All policies which contain such standard wordings or where the wording is substantially similar are to be classified as ISR.
(VI). Marine
Includes Marine Hull (including pleasure craft) and Marine Cargo (including sea and inland transit insurance).
(VII). Aviation
Aviation (including aircraft hull and aircraft liability).
(VIII). Mortgage
Insurance against losses arising from the failure of debtors to meet financial obligations to creditors or under which payment of debts is guaranteed. It includes lease guarantees.
(IX). Consumer credit
Insurance to protect a consumer's ability to meet the loan repayments on personal loans and credit card finance in the event of death or loss of income due to injury, illness or unemployment.
(X). Other accident
Includes the following types of insurance:
Miscellaneous accident (involving cash in transit, theft, loss of money);
All risks (baggage, sporting equipment, guns);
Engineering when not part of ISR or Fire policy;
Plate glass when not part of packaged policy (e.g. houseowners /householders)
Guarantee (Insurance Bonds);
Live Stock;
Pluvius; and
Sickness and Accident which by the terms of the policy provides benefits for no more than three years.
(XI). Other
All other insurance business not specifically mentioned elsewhere. It includes, for example:
Trade Credit;
Extended Warranty (where the insurer extends a manufacturer's or seller’s normal warranty;
Kidnap and Ransom; and
Contingency.
(XII). Compulsory third party motor vehicle (CTP)
This class consists only of CTP business.
(XIII). Public and product liability
Public Liability covers legal liability to the public in respect of bodily injury or property damage arising out of the operation of the insured's business. Product Liability includes policies that provide for compensation for loss and or injury caused by, or as a result of, the use of goods and environmental clean-up caused by pollution spills where not covered by Fire and ISR policies.
Includes builders warranty insurance.
Includes public liability attaching to H & H policies.
(XIV). Professional Indemnity (PI)
PI covers professionals against liability incurred as a result of errors and omissions in performing professional services which has resulted in economic losses suffered by third parties.
Includes Directors' and Officers' liability insurance plus legal expense insurance. Cover for legal expenses is generally included in this type of policy.
(XV). Employers' liability (EL)
Includes:
Workers' compensation;
Seamen's compensation; and
Domestic workers compensation.
Reinsurance Business
The classes of business for companies that provide reinsurance are as follows:
Treaty Proportional: This refers to all forms of quota share and surplus reinsurance written on a treaty reinsurance arrangement basis where the reinsurer is bound to accept all business ceded by the reinsured subject to the terms and conditions of the pre-agreed treaty wording, and shares in the same proportion of premium and losses of the reinsured.
Treaty Excess of Loss: This refers to all reinsurance arrangements where the reinsurer is bound to accept all business ceded by the reinsured and the reinsurer pays losses only above an agreed predetermined limit (retention) up to an agreed maximum amount.
Facultative Proportional: This refers to non-treaty arrangements where each reinsurance contract is on an individual offer and acceptance basis and the reinsurer shares in the same proportion of premium and losses of the reinsured.
Facultative Excess of Loss: This refers to non-treaty arrangements where each reinsurance contract is on an individual offer and acceptance basis. The reinsurer pays losses only above an agreed predetermined limit (retention) up to an agreed maximum amount.
Reinsurance non-split: This line item classification disclosed under Reinsurance class of business is to be used where it is not possible for the insurer to separately split out all the classes of reinsurance businesses.
Where an insurer writes inwards reinsurance which spans multiple classes and the insurer cannot readily split the contract between classes, the contract should be allocated using an appropriate method, including the following methods:
allocate the contract to the category which represents the greatest exposure; or
allocate the contract to the category representing the greatest premium income.
Premiums liabilities under GPS 310
Premiums liabilities relate to all future claim payments arising from future events post the valuation date that will be insured under the insurer’s existing policies that have not yet expired. The value of the premiums liabilities must include an amount in respect of the expenses that the insurer expects to incur in administering and settling the relevant claims and allow for expected premium refunds.
The value of premiums liabilities must not include any Government charges imposed such as levies, duties and taxes. Also a deferred acquisition cost asset must not be reported.
Premiums liabilities are to be determined on a prospective basis; both net and gross of expected reinsurance recoveries and non-reinsurance recoveries.
Premiums liabilities relating to insurance and reinsurance contracts written on a long-term (or continuous) basis, with the option for the party accepting the risk to cancel the contract prior to the expiry date, must make allowance for future claims payments anticipated up to the next possible cancellation date. For instance, if a multi-year contract is written on the basis that it can be cancelled by the risk carrier on a particular date (cancellation date) or within a particular period (so that the earliest cancellation date may be determined). In this case, the insurer or reinsurer would need to account for premiums liabilities for any unexpired risks which may:
arise up to and including the cancellation date; or
remain after the cancellation date.
The estimation of reinsurance recoveries in respect of premiums liabilities for which reinsurance has not yet been purchased can assume that the necessary reinsurance related to those liabilities will be purchased and documented. Allowance must be made for the purchase cost of this reinsurance. This assumption must only be made when existing reinsurance arrangements are documented and when the estimated reinsurance recoveries relate to the same class of business that are currently covered by the existing documented reinsurance arrangements, and it is fully expected that the reinsurance will be replaced on similar terms when current arrangements expire.
The existence of DRE on the balance sheet indicates the existence of reinsurance that may provide partial cover for the premiums liabilities. To the extent that the current reinsurance arrangements cover the premium liability exposure, insurers are not required to include the cost of reinsurance in the premiums liabilities. However, an additional reinsurance cost must be included for any part of the premiums liabilities not covered by current reinsurance arrangements.
For any part of the current reinsurance arrangements that covers future business that has not yet been written, that portion of the associated DRE asset cannot be used to reduce premiums liabilities calculated under GSP 310. To the extent that assets from the underlying reinsurance are not to be deducted in paragraph 25 of Prudential Standard GPS 112 Capital Adequacy: Measurement of Capital (GPS 112), the future business portion of the DRE can be used to increase the surplus (or decrease the deficit) in premiums liabilities calculated under paragraph 16(a)(v) of GPS 112. This revised surplus (or deficit) is included as part of net assets in Australia for Category C insurers and the capital base for all other insurers.
Small insurers[9] 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 premiums liabilities amounts should be determined in the following manner: AASB 1023 UPL less DAC.
The valuation of premiums liabilities for each class of business must comprise:
(a) a central estimate (refer below); and
(b) a risk margin (refer below) that relates to the inherent uncertainty in the central estimate value for premiums liabilities.
The valuation of insurance liabilities (i.e. outstanding claims provisions and premiums liabilities) reflects the individual circumstances of the insurer. In any event, the minimum value of insurance liabilities must be the greater of a value that is:
(c) determined on a basis that is intended to value the insurance liabilities of the insurer at a 75 percent level of sufficiency; and
(d) the central estimate plus one half of a standard deviation above the mean for the insurance liabilities of the insurer.
With respect to direct business and reinsurance business where policies incept in the following reporting period and where these policies would have a material impact on capital adequacy, net written premium for exposure that has not been included in the calculation of the premiums liabilities is to be subject to the premiums liabilities risk charge. The materiality of the business that incepts in the next reporting period should be determined in accordance with the Australian accounting and auditing standards subject to APRA’s discretion.
The calculation of an insurer’s minimum capital requirement (MCR) must reflect the full premium revenue for inwards proportional reinsurance for the full term of the current reinsurance contract.[10] To the extent that the MCR calculation is based on reported premium for inwards proportional reinsurance that does not reflect the full term of the current insurance contract, an adjustment must be made to the MCR. The adjustment is determined by applying the premiums liabilities risk charge factor to any inwards proportional reinsurance premium revenue not recognised.
(a) The central estimate
The central estimate is intended to reflect the mean value in the range of possible values for the outcome (that is, the mean of the distribution of probabilistic outcomes). The determination of the central estimate must be based on assumptions as to future experience which reflect the experience and circumstances of the insurer and which are:
made using judgement and experience;
made having regard to reasonably available statistics and other information; and
neither deliberately overstated nor understated.
Where experience is highly volatile, model parameters estimated from the experience can also be volatile. The central estimate should therefore reflect as closely as possible the likely future experience of the insurer. Judgment may be required to limit the volatility of the assumed parameters to that which is justified in terms of the credibility of the experience data.
The central estimate will be measured as the present value of the future expected payments. This measurement process will involve prospective calculations and modelling techniques, and will require assumptions in respect of the expected future experience, taking into account all factors which are considered to be material to the calculation, including:
discount rate;
claims escalation;
claims and policy management expenses; and
claims run-off.
The assumptions used must be consistent for the estimation of both outstanding claims provisions and premiums liabilities. Where they are not, the reasons must be documented.
(b) The risk margin
The risk margin is to be valued in accordance with the requirements of GPS 310. The risk margin is the component of the value of premiums liabilities that relates to the inherent uncertainty that outcomes will differ from the central estimate. It is aimed at ensuring that the value of the premiums liabilities is established at an appropriate and sufficient level. The risk margin does not relate to the risk associated with the underlying assets, including asset-liability mismatch risk.
Risk margins must be determined, for each class of business, and in total, on a basis that reflects the experience of the insurer. In any event, the risk margin must be valued so that the insurance liabilities of the insurer, after any diversification benefit, are not less than the greater of a value that is:
(a) determined on a basis that is intended to value the insurance liabilities of the insurer at a 75 per cent level of sufficiency; and
(b) the central estimate plus one half of a standard deviation above the mean for the insurance liabilities of the insurer.
The risk margins must be determined having regard to the uncertainty of the gross insurance liabilities and to any uncertainty related to the estimate of reinsurance recoverables, expected reinsurance recoveries and non-reinsurance recoveries that are deducted from the estimate of gross insurance liabilities.
The insurer should establish premiums liabilities in GRF 300.0 Statement of Financial Position at a level consistent with that calculated under AASB 1023, as shown in Part 3B of GRF 210.1. However for the purposes of this form only, parts labelled as ‘GPS 310 Premiums Liabilities’ are to be measured and reported in accordance with GPS 310 and disclosed by type of insurance business (direct business and inwards reinsurance business).
Note: Any amount of the ‘AASB 1023 Net Premiums Liabilities’ reported in GRF 210.1 Premiums Liabilities – Insurance Risk Charge in surplus or deficit of the amount required by GPS 310, will be added back to or deducted from net assets in Australia in GRF 110.0 Minimum Capital Requirement for branch insurers and added back to Tier 1 capital in GRF 120.0 Determination of Capital Base for all other insurers. Such amounts will also be reflected in Part 3C of GRF 210.1.
Quarterly actuarial reviews are not required to be conducted specifically for the purposes of completing this form.
For the ‘Direct business’ and ‘Reinsurance business’, amounts are to be reported as follows:
Part 1A: Direct business - GPS 310 Premiums Liabilities
Includes premiums liabilities associated with the insurance business written directly by the insurer.
Note: For the purposes of completing this form, Branch insurers (Category C insurers) are to report the total premiums liabilities. This will include amounts inside and outside Australia.
Part 2A: Reinsurance business – GPS 310 Premiums Liabilities
Include premiums liabilities associated with reinsurance business written by the insurer.
Note: For the purposes of completing this form, Branch insurers (Category C insurers) are to report the total premiums liabilities. This will include amounts inside and outside Australia.
Premiums Liabilities
Gross PL - Central Estimate (2)
For each line of business, report the central estimate of the premiums liabilities that are calculated in accordance with GPS 310.
Gross PL - Risk Margin (3)
For each line of business, report the risk margin for the premiums liabilities that are calculated in accordance with GPS 310.
Gross PL - Total (4)
Represents the total of the central estimate and risk margin. Do not enter a value as this is automatically calculated by the form.
Non-Reinsurance Recoveries (5)
Non-reinsurance recoveries are amounts that may be recovered under arrangements other than reinsurance arrangements, such as salvage and subrogation.
For each line of business, report the expected non-reinsurance recoveries associated with the premiums liabilities estimated in a manner consistent with the methodology used in the most recent Insurance Liability Valuation Report prepared by the Appointed Actuary.
The estimates of non-reinsurance recoveries expected to be received must be based on the nature of the expected claims and the history of non-reinsurance recoveries compared to claims.
Expected Reinsurance Recoveries (6)
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.
Part 3A: GPS 310 Total
This part is calculated automatically and represents the total of Parts 1A and 2A.
Part 3B: AASB 1023 Total
This part is calculated automatically and represents the total of Parts 1B and 2B.
Other items description
Provide a brief (no more than 200 characters) description of the items reported in the ‘Other items’ column in part 3B along with the amount.
Part 3C: Total Premium liabilities Surplus / Deficit
Total Direct Business - Premiums liabilities Surplus / Deficit and Total Reinsurance Business - Premiums liabilities Surplus / Deficit are calculated automatically. Both items represent the difference between AASB1023 net premium liabilities (Parts 1B and 2B) and GPS 310 net premiums liabilities (Parts 1A and 2A).
Total deferred reinsurance expense for future business not yet written represents the component of reinsurance paid or payable which is available for future business written up to the end of the reinsurance contract. Amounts cannot be included in this item where the underlying reinsurance arrangements do not comply with the threshold levels of the reinsurance documentation test set out in GPS 112 or the governing law requirements set out in GPS 230. This amount must not be negative.
Total Premiums liabilities Surplus / Deficit is calculated by adding the three components mentioned above.
For branch insurers this surplus or deficit, that represents amounts inside Australia, will be added back to or deducted from adjusted net assets in Australia in GRF 110.0_B Minimum capital requirement. This calculation is derived in GRF 300.0_B Statement of Financial Position. For all other insurers it will be added back to or deducted from the capital base in GRF 120.0 Determination of Capital Base.