Featured Product

    APRA Proposes to Align Capital and Reporting Frameworks with AASB 17

    November 25, 2020

    APRA published a discussion paper that outlines plans to align the capital and reporting frameworks for life, general, and private health insurance with AASB 17 on insurance contracts, where appropriate. AASB 17 implements the equivalent IFRS 17 in Australia. APRA is also updating the Life and General Insurance Capital (LAGIC) framework, given it has not been substantively reviewed since it was implemented in 2013. The consultation on the discussion paper will close on March 31, 2021. APRA intends to publish a Response to Submissions paper and draft standards in the fourth quarter of 2021, with the final standards to be released in 2022. The final APRA capital and reporting standards will then become effective from July 01, 2023.

    AASB 17 establishes principles for the recognition, measurement, presentation, and disclosure of insurance contracts. The introduction of AASB 17 will both modify a number of accounting concepts that underpin the prudential framework of APRA and introduce some new concepts. The aim is to consult on and finalize changes to the capital and reporting frameworks of APRA in advance of the 2023 AASB 17 commencement date, to ensure that the regulatory burden is minimized. The proposals in this discussion paper are intended to maintain the resilience of the capital and reporting frameworks and the financial stability of the industry going forward. These proposals are timely, as stakeholder feedback from insurers has consistently indicated a strong desire for early direction from APRA on how the capital and reporting frameworks are likely to change as a result of AASB 17. The key proposals include the following

    • For reporting, APRA proposes to align the reporting framework with AASB 17. Insurers will be able to use the AASB 17 accounting policies and principles to report financial performance and insurance asset and liability items to APRA. However, for life insurance, there are a number of areas where APRA proposes to prescribe reporting directions, given the requirements set out in the Life Insurance Act 1995 (Life Act).
    • APRA proposes to enhance the granularity of product reporting and liability reporting groups. These enhancements are intended to address concerns that existing APRA product reporting does not provide detailed insights on the profitability of products and their long term financial sustainability. Further granularity in product reporting would assist APRA, insurers, and other stakeholder to better monitor sustainability and performance of certain products over time. 
    • APRA proposes to introduce new product groups across general insurance and life insurance and outline reporting directions across insurance sector to help insurers to better prepare for AASB 17 implementation for reporting.
    • For the general and life insurance capital framework, APRA proposes to retain the majority of the existing requirements for the regulatory capital calculation. The majority of the capital proposals outlined in this paper relate to clarifications of the regulatory capital calculation, given the introduction of AASB 17.
    • With respect to regulatory adjustments, APRA proposes no change in the overall approach to the application of the liability regulatory adjustment; however, additional regulatory adjustments are proposed to minimize impact from AASB 17 changes.

    The implementation of AASB 17 is expected to result in amendments to multiple prudential standards. Therefore, APRA is taking this opportunity to address the areas identified for update across the LAGIC framework, to ensure that the framework remains fit-for-purpose. The majority of proposed revisions do not seek to fundamentally change the operation of the prudential framework, nor do they seek to generally increase or reduce capital levels. APRA is also reviewing the capital framework for private health insurers. To avoid duplicative effort and cost for insurers, APRA intends to align the commencement of the private health insurer capital framework with the implementation of AASB 17 for prudential purposes from July 01, 2023. APRA proposes that all insurers, regardless of their financial year-end, commence reporting to APRA (for quarterly, interim, and annual reports) and determining regulatory capital requirements on an AASB 17 basis from July 01, 2023. 

    Additionally, APRA has decided to conduct a targeted Quantitative Impact Study (QIS) in 2020 alongside this discussion paper. Insurers selected to participate in the targeted QIS have been individually notified by APRA and only targeted insurers will be required to complete the workbooks published alongside the discussion paper. To assess industry progress, APRA intends to conduct a further implementation survey in the second quarter of 2021 and engage with individual insurers that have not adequately progressed with their implementation.


    Related Links

    Comment Due Date: March 31, 2021

    Effective Date: July 01, 2023

    Keywords: Asia Pacific, Australia, Insurance, IFRS 17, AASB 17, Insurance Contracts, Reporting, LAGIC Framework, QIS, APRA

    Featured Experts
    Related Articles

    BIS Paper Studies Impact of Fintech Lending on Small Businesses in US

    The Bank for International Settlements (BIS) published a paper that studies impact of fintech lending on credit access for small businesses in U.S.

    September 26, 2022 WebPage Regulatory News

    UK Regulators Issue CRR Changes and Stress Test Scenarios for Banks

    The Prudential Regulation Authority (PRA) issued the policy statement PS8/22 to amend the Own Funds and Eligible Liabilities (CRR) Part of the PRA Rulebook and update the supervisory statement SS7/13 titled "Definition of capital (CRR firms).

    September 26, 2022 WebPage Regulatory News

    EBA Launches EU-Wide Transparency Exercise in 2022

    The European Banking Authority (EBA) launched the EU-wide transparency exercise for 2022, with results of the exercise expected to be published at the beginning of December, along with the annual Risk Assessment Report.

    September 23, 2022 WebPage Regulatory News

    SRB on CRR Quick-Fix to Policy for Multiple Point of Entry Banks

    The Single Resolution Board (SRB) welcomed the adoption of the review of the Capital Requirements Regulation, or CRR, also known as the "CRR quick-fix."

    September 22, 2022 WebPage Regulatory News

    EC Rule Lists Advanced Economies for Market Risk Capital Calculations

    The European Commission (EC) recently adopted the Delegated Regulation 2022/1622, which sets out the regulatory technical standards to specify the countries that constitute advanced economies for the purpose of specifying risk-weights for the sensitivities to equity.

    September 21, 2022 WebPage Regulatory News

    EBA Publishes Final Regulatory Standards on STS Securitizations

    The European Banking Authority (EBA) published the final draft regulatory technical standards specifying and, where relevant, calibrating the minimum performance-related triggers for simple.

    September 20, 2022 WebPage Regulatory News

    ECB Further Reviews Costs and Benefits Associated with IReF

    The European Central Bank (ECB) is undertaking the integrated reporting framework (IReF) project to integrate statistical requirements for banks into a standardized reporting framework that would be applicable across the euro area and adopted by authorities in other EU member states.

    September 15, 2022 WebPage Regulatory News

    EBA Publishes Funding Plans Report, Receives EMAS Certification

    The European Banking Authority (EBA) has been awarded the top European Standard for its environmental performance under the European Eco-Management and Audit Scheme (EMAS).

    September 15, 2022 WebPage Regulatory News

    MAS Launches SaaS Solution to Simplify Listed Entity ESG Disclosures

    The Monetary Authority of Singapore (MAS) set out the Financial Services Industry Transformation Map 2025 and, in collaboration with the SGX Group, launched ESGenome.

    September 15, 2022 WebPage Regulatory News

    BCBS to Finalize Crypto Rules by End-2022; US to Propose Basel 3 Rules

    The Basel Committee on Banking Supervision met, shortly after a gathering of the Group of Central Bank Governors and Heads of Supervision (GHOS), the oversight body of BCBS.

    September 15, 2022 WebPage Regulatory News
    RESULTS 1 - 10 OF 8521