Lloyd’s security trust fund instrument No. 2 of 2017
Insurance Act 1973
I, Heidi Richards, delegate of APRA, under subsection 70(1) of the Insurance Act 1973 (the Act), MAKE these rules, in the form set out in the Schedule to this instrument, titled “Lloyd’s Security Trust Fund Rules”, that are applicable to the operation of designated security trust funds.
This instrument takes effect on the date of registration on the Federal Register of Legislation.
Dated: 12 April 2017
[Signed]
Heidi Richards
General Manager
Policy & Advice Division
Interpretation
In these rules:
APRA means the Australian Prudential Regulation Authority.
designated security trust fund has the meaning given in section 69 of the Act.
Schedule
Lloyd’s Security Trust Fund Rules comprises the 13 pages commencing on the following page.
“Australian Auditing Standards” means is a reference to the Australian Auditing Standards issued by the Auditing and Assurance Standards Board (AUASB) as in force from time to time;
‘bank’ means an authorised deposit-taking institution within the meaning of subsection 5(1) of the Banking Act 1959 (the Banking Act), but does not include a building society, credit union, provider of purchased payment facilities or an authorised non-operating NOHC within the meaning of subsection 5(1) of the Banking Act;
“Lloyds Security Trust Fund Arrangements” means a legislative instrument, as in force from time to time, made under subsection 68(1) of the Act; and
‘trustee’ means any trustee of a designated security trust fund.
Compliance with the Act and trust deed
A trustee must comply with:
provisions of the Act applicable to trustees; and
the trust deed of the security trust fund of which they are the trustee and approved by APRA under the Lloyd’s Security Trust Fund Arrangements.
Assets
A trustee must hold the assets of the designated security trust fund of which they are the trustee and apply them in accordance with paragraphs 8 to 11.
An asset of a designated security trust fund must be an asset in Australia unless it is transferred outside Australia under the terms of the trust deed.
A trustee must not hold an excluded asset.
For paragraph 9, an asset is excluded if:
it is an asset that would not be included as an asset for Part III of the Act if:
it were an asset of Lloyd’s underwriters, Equitas Limited or Equitas Reinsurance Limited; and
the holder of the asset were taken to be a body corporate authorised to carry on insurance business;
the asset is re-invested through an interposed body corporate, trust or partnership with Lloyd’s, Equitas Limited or Equitas Reinsurance Limited; or
the asset is not acquired or maintained at arm’s length from the other party to the relevant transaction.
A letter of credit is an asset only if:
it is given by a bank;
it is irrevocable; and
it provides for immediate payment at the written direction of the trustee.
Valuation of assets
For these rules, the value of an asset of a designated security trust fund is:
the market value of the asset; or
in the case of a letter of credit, its face value.
Liabilities
A trustee must not:
borrow for the purposes of the trust;
charge the assets of the trust; or
incur, or allow to be incurred, a liability that is not for the purposes of the trust.
Suspense account
A trustee must hold in a suspense account assets:
transferred to it for the purposes of a designated security trust fund; but
for which the trustee is not given sufficient information to complete its records.
A trustee must not apply funds from a suspense account unless:
APRA has given written approval; or
the trustee has obtained the information mentioned in subparagraph 14(b) and transfers the funds to the relevant designated security trust fund.
Records
A trustee must keep or cause to be kept, for 7 years after the completion of the transactions to which they relate, records that allow:
the accounts and statements mentioned in Attachments A and B to be prepared and audited properly and conveniently; and
the trust to be performed, including under judicial trusteeship and winding up under the Act.
A trustee must give to APRA the accounts and statements mentioned in Attachment A in the form, for the periods and within the time mentioned in Attachment A.
A trustee must ensure the accounts and statements mentioned in Attachment B are audited by an auditor who is approved by APRA.
The trustee must give to APRA an audit certificate in a form approved by APRA and within the time mentioned in Attachment B.
Notices
A trustee must give to APRA written notice of the following matters:
intention to resign;
receipt of a notice of removal as trustee;
failure to fund the designated security trust fund to the level required by the Lloyd’s Security Trust Fund Arrangements; and
default of more than 30 days in payment to the trustee for its services.
Giving information
A trustee must provide a copy of the terms of a designated security trust fund if asked by:
a party to a contract of insurance that is covered by the designated security trust fund; or
a person who intends to become a party to a contract of insurance that is covered by the designated security trust fund.
A trustee may charge a reasonable amount for copying material that has previously been given to the person mentioned in paragraph 21.
A trustee must give to Lloyd’s enough information to allow Lloyd’s to give to APRA information, accounts, statements and actuarial reports required under the Act.
Review of APRA’s decisions
Part VI of the Act applies to a decision of APRA under these rules.
Determinations made under previous instrument
Any exercise of APRA’s discretion under the Lloyd’s Security Trust Fund Rules No 1 made on 9 June 2000 continues to have effect as though exercised pursuant to a corresponding power (if any) exercisable by APRA under this instrument.
Attachment A – Accounts and statements
Part 1 - Commentary
The accounts and statements required for paragraph 17 are:
Form T1—Annual Statement of Assets and Liabilities of the Trustee (to be lodged by each trustee to a designated security trust fund within 4 months of the trustee’s balance date); and
Form T2Q—Quarterly Schedule of DSTF assets (to be lodged within 45 days of the end of each three months period ending 31 March, 30 June, 30 September and 31 December);
as set out in Part 2 of this Attachment.
Dollar amounts are to be rounded to the nearest multiple of $1,000. For example, $10,500 is to be rounded down to $10,000 and $10,501 is to be rounded up to $11,000.
The statements are to be signed by a director of the trustee.
The trustee may provide as an alternative to Form T1, a copy of a balance sheet duly lodged for the purposes of the applicable provisions of the Corporations Act 2001.
Part 2 – Forms
FORM TI
Insurance Act 1973 LLOYD’S SECURITY TRUST FUND RULESForm T1 ANNUAL STATEMENT OF ASSETS AND LIABILITIES OF THE TRUSTEE
Name of trustee: ACN:
Name(s) of designated security trust fund(s) to which a party:
Balance date: (Signed and dated)...........................................(Director)
Total
Item
$’000
CURRENT ASSETS
Cash
Receivables
Investments
Other
Total current assets
NON-CURRENT ASSETS
Receivables
Investments
Other
Total non-current assets
TOTAL ASSETS
CURRENT LIABILITIES
Creditors and borrowings
Provisions
Total Current Liabilities
NON-CURRENT LIABILITIES
Creditors and borrowings
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS’ EQUITY
Share capital
Retained profits (losses) at end of financial year
Other
TOTAL SHAREHOLDERS’ EQUITY
FORM T2Q
Insurance Act 1973 LLOYD’S SECURITY TRUST FUND RULES<br>Form T2Q QUARTERLY SCHEDULE OF DSTF ASSETS
Name of designated security trust fund:
Report for quarter ended: (Signed and dated)..........................................................(Director)<br>
Inside Australia
ASSETS Related trusts & bodies corporate Other Total
(1) (2) (3)
$’000 $’000 $’000
A) CASH
B) DEBT SECURITIES
Bills of exchange
Promissory notes (commercial paper) issued by:
Commonwealth government bodies
Other government bodies
Non-bank financial intermediaries
Other
Negotiable certificates of deposit (NCDs)
Bonds, inscribed stock, debentures, medium-term notes and transferable certificates of deposit (TCDs) issued by:
Commonwealth government bodies
State and local government owned trading companies
Banks
Non-bank financial intermediaries
Other
Foreign debt securities inside Australia
Sub-total
C) SHARES
LISTED
Private trading companies
Banks
Non-bank financial intermediaries
Other
Sub-total
UNLISTED
Private trading companies
Banks
Life insurance companies
Other
Foreign shares inside Australia
Sub-total
D) OPTIONS
Listed
Unlisted
Sub-total
E) UNITS IN TRUSTS - LISTED
Property
Trading public unit trusts
Other listed public units trusts
Foreign units inside Australia
Sub-total
UNITS IN TRUSTS - UNLISTED
Cash management
Property
Trading public unit trusts
Other
Foreign units inside Australia
Sub-total
F) DEPOSITS
Banks
Non-bank financial intermediaries
Fund managers
Other
Sub-total
G) OTHER FINANCIAL INSTRUMENTS
H) OTHER INVESTMENTS
I) ALL OTHER ASSETS
TOTAL
Attachment B - Trustee audit requirements
Part 1 - Commentary
The statement required for paragraph 18 is Form T2 - Annual Schedule of DSTF assets (to be lodged within 4 months of the end of each calendar year) as set out in Part 2 of this Attachment.
Dollar amounts are to be rounded to the nearest multiple of $1,000. For example, $10,500 is to be rounded down to $10,000 and $10,501 is to be rounded up to $11,000.
The statement is to be signed by a director of the trustee.
An audit certificate in the form approved under paragraph 19 must be lodged within 4 months of the annual balance date.
Part 2 – Forms
FORM T2 (AUDITED)
Insurance Act 1973 - LLOYD’S SECURITY TRUST FUND RULES<br>Form T2 (Audited) ANNUAL SCHEDULE OF DSTF ASSETS
Name of designated security trust fund:
Report for year ended: (Signed and dated)..........................................................(Director)<br>
Inside Australia
ASSETS Related trusts & bodies corporate Other Total
(1) (2) (3)
$’000 $’000 $’000
A) CASH
B) DEBT SECURITIES
Bills of exchange
Promissory notes (commercial paper) issued by:
Commonwealth government bodies
Other government bodies
Non-bank financial intermediaries
Other
Negotiable certificates of deposit (NCDs)
Bonds, inscribed stock, debentures, medium-term notes and transferable certificates of deposit (TCDs) issued by:
Commonwealth government bodies
State and local government owned trading companies
Banks
Non-bank financial intermediaries
Other
Foreign debt securities inside Australia
Sub-total
C) SHARES
LISTED
Private trading companies
Banks
Non-bank financial intermediaries
Other
Sub-total
UNLISTED
Private trading companies
Banks
Life insurance companies
Other
Foreign shares inside Australia
Sub-total
D) OPTIONS
Listed
Unlisted
Sub-total
E) UNITS IN TRUSTS - LISTED
Property
Trading public unit trusts
Other listed public units trusts
Foreign units inside Australia
Sub-total
UNITS IN TRUSTS - UNLISTED
Cash management
Property
Trading public unit trusts
Other
Foreign units inside Australia
Sub-total
F) DEPOSITS
Banks
Non-bank financial intermediaries
Fund managers
Other
Sub-total
G) OTHER FINANCIAL INSTRUMENTS
H) OTHER INVESTMENTS
I) ALL OTHER ASSETS
TOTAL
[1] Note, in accordance with paragraph 13(1)(b) of the Legislation Act 2003, expressions used in these rules have the same meaning as in the Act. In particular, ‘covered’, ‘designated security trust fund’, ‘insurance liability’, ‘Lloyd’s’ and ‘qualified corporation’ have the same meaning as in the Act.