Reporting lagReporting lag

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 140.4 Investments –Indirectly Held by Insurer 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 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 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 114.

Investment Risk Charge

This column for each form will calculate the appropriate investment risk charge in accordance with GPS 114.

Holding in indirect investment vehicles

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 this form. 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.

Look-through Basis

For assets of an insurer or its ELE held under a trust (other than a cash management trust), the insurer may apply the Investment Capital Factors applicable to the underlying assets (including derivatives) of the trust, if the insurer has information on the underlying assets.

Where the insurer has elected to apply the look-through basis to calculate the investment capital factors and the underlying assets of the trust includes listed equities; then the investment capital factors associated with the insurer’s share of the listed equities are to be calculated in GRF 140.1 Investments – Direct Equity Holdings and Risk Charge.

APRA may require an insurer to apply different Investment Capital Factors to different components of a hybrid instrument (with both equity and debt features such as embedded derivatives).

Securities Purchased (Sold) under agreements to resell (repurchase) and stock lending/borrowing