Insurance (prudential standard) determination No. 4 of 2011 - Prudential Standard GPS 311 - Audit and Actuarial Reporting and Valuation: Level 2 Insurance Groups
Valuation of insurance liabilitiesValuation of insurance liabilities
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Valuation of insurance liabilities
- A Level 2 insurance group must value its insurance liabilities in accordance with this Prudential Standard. Attachment A provides further details on this valuation. The valuation must then be used for the purpose of:
(a) calculating the group’s Minimum Capital Requirement in accordance with the capital standards; and
(b) completing the group’s accounts in accordance with reporting standards made under the Collection of Data Act.
- Where a Level 2 insurance group includes in its accounts a value for insurance liabilities which is inconsistent with the advice of its Group Actuary, the parent entity of the group must notify APRA in writing at the same time the group submits its accounts to APRA. This written notification must include:
(a) the reasons for not accepting the Group Actuary’s advice; and
(b) where relevant, details of the alternative assumptions and methodologies used for determining the value of the insurance liabilities.
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Subject to paragraph 41, a Level 2 insurance group must determine the value of its insurance liabilities in a manner consistent with that set out in GPS 310. In respect of Australian business, the insurance liability valuation for a Level 2 insurance group should be the same as that applicable to an insurer under GPS 310 subject to identified consolidated adjustments such as intra-group transactions and diversification.
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In respect of international business, the insurance liability valuation for a Level 2 insurance group may be based on accounting entries for outstanding claims and premiums liabilities, subject to:
(a) assessment by the Group Actuary of the appropriateness of these entries relative to the requirements of GPS 310; and
(b) any adjustments required as a consequence of this assessment.
The requirements specified in paragraphs (a) and (b) will not apply to international consolidated entities which APRA deems to be immaterial. The parent entity of a Level 2 insurance group will need to consult with APRA prior to excluding any international consolidated entities from the requirements in paragraphs (a) and (b).
Consolidation adjustments referred to in paragraph 40 may also be required. Attachment A provides further detail of the assessment by the Group Actuary that is required, including the requirement to apply a liability adequacy test at a 75 per cent probability of sufficiency (prescribed liability adequacy test).
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On the application of the parent entity of a Level 2 insurance group, APRA may determine that the Group Actuary of the Level 2 insurance group can apply the method set out in paragraph 41 in relation to its Australian business. APRA’s determination may be subject to conditions.