Financial Sector (Collection of Data) (reporting standard) determination No. 88 of 2008 - GRS 440.0 (2008) - Claims Development Tables
Reporting Form GRF 440.0Reporting Form GRF 440.0
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Turn the raw legal text into a practical explanation grounded in Financial Sector (Collection of Data) (reporting standard) determination No. 88 of 2008 - GRS 440.0 (2008) - Claims Development Tables.
The purpose of this form is to capture information on the claims development profile of individual insurance companies.
This instruction guide provides general directions for completion of GRF 440.0 Claims Development Table.
Direct insurance business (excepting mortgage insurance) must be completed based on accident year. Reinsurance and mortgage insurance business must be completed on an underwriting year basis. In either case, the year will be based on the financial year of the insurer.
Audit requirements
The information provided under the form is not required to be audited. APRA will instead rely on the reconciliation to the APRA net provisions and the Financial Information Declaration signed by the chief executive officer (CEO) (by whatever name called, or for a foreign insurer, the local equivalent) and the chief financial officer (CFO) (by whatever name called, or for a foreign insurer, the local equivalent).
Reporting entities
Forms are to be completed for the following reporting entities where appropriate:
Branch operations 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).
Unit of measurement
This form is to be presented in Australian currency, rounded to thousands of dollars, with no decimal place. 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:
Foreign currency monetary items[1] outstanding at the reporting date must be translated at the spot rate[2] at the reporting date.
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.
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’ (eg 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.
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 an annual basis.
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 reporting period as set out in Reporting Standard GRS 440.0 Claims Development Table.
Specific instructions
Direct insurance business must be completed based on accident year. Reinsurance business must be completed on an underwriting year basis. These terms are explained below.
Accident Year
This refers to the financial year of the insurer that the losses/claims are incurred. For example, the 2007 accident year for an insurer with a balance date of 30 June will relate to claims with dates of loss (regardless of notification date) occurring between 1 July 2006 and 30 June 2007.The form is to be completed for each of the following years:
current accident year;
accident year, 1 year previous;
accident year, 2 years previous;
accident year, 3 years previous;
accident year, 4 years previous;
accident year, 5 years previous;
accident year, 6 years previous;
accident year, 7 years previous;
accident year, 8 years previous;
accident year, 9 years previous;
accident year, 10 years previous; and
accident year, more than 10 years previous.
Underwriting Year
Underwriting year refers to the financial year of the insurer in which the policy incepts, regardless of when the premiums and claims are actually reported, booked or paid. For example, the 2005 underwriting year for an insurer with a 30 June balance date includes premiums and claims (both paid and outstanding) attaching to policies incepting in the period 1 July 2005 to 30 June 2006. For an insurer with a 31 December balance date, the 2005 underwriting year includes premiums and claims (both paid and outstanding) attaching to policies incepting in the period 1 January 2005 to 31 December 2005. The form is to be completed for each of the following years:
current underwriting year;
underwriting year, 1 year previous;
underwriting year, 2 years previous;
underwriting year, 3 years previous;
underwriting year, 4 years previous;
underwriting year, 5 years previous;
underwriting year, 6 years previous;
underwriting year, 7 years previous;
underwriting year, 8 years previous;
underwriting year, 9 years previous;
underwriting year, 10 years previous; and
underwriting year, more than 10 years previous.
Each of the years in this form are complete years reported on a financial year to date basis as at the last business day of the financial year of the insurer. No adjustments are required to be made to prior year reported information.
Where possible, insurers are requested to complete the entire series of years.
Classes of Insurance Business
Direct Business
The classes of business for companies that are not specialist reinsurers 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 are to be separated and included in Public and Product Liability class of business – item (XIII).
(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), 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 guarantee.
(IX). Consumer Credit (CCI)
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 provides stated benefits where the insured is killed or suffers loss of specific parts of the body or is prevented from carrying out the insured’s normal occupation. In addition, regular benefits may be paid over a short period of time (typically less than 3 years), noting that continuous disability policies are now considered to be Life Insurance Policies and should not be provided by General Insurance companies).
(XI). Other
All other insurance business not specifically mentioned elsewhere. It includes, for example:
All guarantees (e.g. fidelity Guarantee)
Trade Credit;
Extended Warranty (includes insurance by a third party for a period in excess of the 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 also environmental clean-up caused by pollution spills where not covered by Fire and ISR policies.
Also will include builders warranty insurance.
Includes public liability attaching to houseowners/householders policies.
(XIV). Professional Indemnity (PI)
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 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 must be allocated using an appropriate method, including the following methods:
(a) allocate the contract to the category which represents the greatest exposure; or
(b) allocate the contract to the category representing the greatest premium income.
An insurer that underwrites inwards reinsurance is free to choose which of the above methods it uses, or may use another appropriate method, provided the same method is used for all contracts and all subsequent periods.
Below is an explanation of the terms in the form. Note that any reference to gross means net of non-reinsurance recoveries and gross of reinsurance recoveries. A reference to ‘net’ means net of both reinsurance and non-reinsurance recoveries. In some instances the insurer’s reinsurance arrangements will be complicated (for example multi-year reinsurance treaties, aggregate deductibles, reinsurance treaties across multiple lines of business etc) and as a result insurers may need to apportion the reinsurance premiums and recoveries. Material apportionments must be either prepared by or reviewed by the insurer’s Appointed Actuary.
Fields that are to be completed on a cumulative basis:
Gross and net earned and written premium
Number of claims reported
Gross and net claim payments
Fields that are NOT to be completed on a cumulative basis:
Number of claims outstanding
Gross and net case estimates
Gross and net IBNR/IBNER
(1) Gross and net premium
Earned premium is to be reported both gross and net of reinsurance expense for each accident year. Gross and net premium earned is to be reported in this form in accordance with AASB 1023 ‘General Insurance Contracts’. Written premium is to be reported both gross and net of reinsurance expense for each underwriting year.
The amount reported for ‘Current Accident/Underwriting Year’ will generally be the same reported for the ‘Accident/Underwriting Year – 1 Year Previous’ in the following financial year. For example:
Financial Year Ended
Current Accident/Underwriting Year
Accident/Underwriting Year – 1 Year Previous
Accident/Underwriting Year – 2 Years Previous
31 December 2001
4,000
2,000
31 December 2002
5,000
4,000
2,000
However, it is acknowledged that there may be some premium adjustments made after the insurer reports the ‘Current Accident/Underwriting Year’ data and as a result there may be some movement in the premium figures reported at later dates.
Premium revenue is to take into account the following:
Do not include amounts collected on behalf of third parties i.e. government stamp duty and taxes;
Levies charged to customers are to be included such as fire service levies;
Deduct returned premiums and rebates;
Premiums are to be brought to account from the attachment date;
For installment premium policies, the amount of the annualised premium is to be reported; and
Premium revenue must be shown both gross and net of reinsurance expense.
(2) Number of claims reported
Include the cumulative total gross number of claims reported for each class of business by accident/underwriting year at the end of the reporting period. This column is not applicable for proportional reinsurance business, as this information is generally not known.
(3) Number of claims outstanding
Include the actuarial gross central estimate of the number of claims outstanding for each class of business by accident/underwriting year as at the end of the reporting period. This column may not be applicable for classes valued using actuarial techniques which do not estimate numbers of claims outstanding.
(4) Gross and net claim payments
Report the amount of gross and net claim payments attributable to each accident/underwriting year on a cumulative basis, for classes of direct and reinsurance business. Gross claim payments must be reported net of non-reinsurance recoveries. Net claim payments must be reported net of reinsurance and non-reinsurance recoveries. In both cases include recoveries that have been received or are expected to be received only in relation to claims already paid.
(5) Gross and net case estimate
Gross and net case estimates are to be disclosed by type of business. This relates to the gross and net case estimates included in the Outstanding Claims Provision as at the end of the development year for the specified accident/underwriting year.
For the purposes of this form, case estimates must be reported:
As the balance outstanding at the end of the year.
Net of non-reinsurance recoveries (for gross case estimates).
Net of reinsurance and non-reinsurance recoveries (for net case estimates).
Excluding IBNR/IBNER, claims handling expenses and risk margins.
(6) Gross and net IBNR/IBNER
Gross and net IBNR/IBNER is to be disclosed by type of business. This relates to the IBNR/IBNER included in the Outstanding Claims Provision as at the end of the development year for the specified accident/underwriting year.
For the purposes of this form, the IBNR/IBNER must be reported:
As the balance outstanding at the end of the year.
Inflated and undiscounted.
Net of non-reinsurance recoveries (for gross IBNR/IBNER).
Net of reinsurance and non-reinsurance recoveries (for net IBNR/IBNER).
Excluding claims handling expenses.
As the central estimate only; that is do not include a risk margin.
(7) Total gross and net ultimate cost (inflated & undiscounted)
This is automatically calculated by the form and represents the sum of (respectively for gross and net):
Claim payments;
Case estimates; and
IBNR/IBNER.
(8) Gross and net outstanding claims (inflated and undiscounted)
This is automatically calculated by the form (respectively for gross and net) as:
Total ultimate cost (inflated & undiscounted);
Less:
Claim payments.
(9) Discounting on net outstanding claims
Include the impact of discounting the net actuarial central estimate of outstanding claims (excluding claims handling expenses). This data is only required as an aggregate total for direct business and reinsurance business.
(10) Claims handling expenses on net outstanding claims
Include the claims handling expense allowance in the net actuarial central estimate of outstanding claims. This data is only required as an aggregate total for direct business and reinsurance business.
(11) APRA Risk Margin on net outstanding claims
Include the APRA risk margins (75% probability of sufficiency including diversification benefits) included in the APRA net Outstanding Claims Provision. This data is only required as an aggregate total for direct business and reinsurance business.
(12) APRA net OCP
This column is automatically calculated as:
Net outstanding claims (inflated & undiscounted);
Less:
Discount on net outstanding claims;
Plus:
Claims handling expenses on net outstanding claims;