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
    News

    BIS Innovation Hub Sets Out Work Program for 2021

    BIS Innovation Hub published the work program for 2021, with focus on suptech and regtech, next-generation financial market infrastructure, central bank digital currencies, open finance, green finance, and cyber security.

    January 22, 2021 WebPage Regulatory News
    News

    EC Plans to Consult on Crisis Management and EDIS Framework Revisions

    In an article published by SRB, Mairead McGuinness, the European Commissioner for Financial Services, Financial Stability, and Capital Markets Union, discussed the progress and next steps toward completion of the Banking Union.

    January 21, 2021 WebPage Regulatory News
    News

    EBA Finalizes Remuneration Standards for Investment Firms in EU

    EBA finalized the two sets of draft regulatory technical standards on the identification of material risk-takers and on the classes of instruments used for remuneration under the Investment Firms Directive (IFD).

    January 21, 2021 WebPage Regulatory News
    News

    ECA Recommends Actions to Enhance Resolution Planning for Banks

    EC published, in the Official Journal of the European Union, a notification that the European Court of Auditors (ECA) has published a special report on resolution planning in the Single Resolution Mechanism.

    January 20, 2021 WebPage Regulatory News
    News

    BoE Publishes Key Elements of the 2021 Stress Testing for Banks in UK

    BoE published a scenario against which it will be stress testing banks in 2021, in addition to setting out the key elements of the 2021 stress test, guidance on the 2021 stress test, and the variable paths for the 2021 stress test.

    January 20, 2021 WebPage Regulatory News
    News

    PRA Proposes Rules on Identity Verification of Depositor Protection

    PRA published a consultation paper (CP3/21) proposes rules regarding the timing of identity verification required for eligibility of depositor protection under the Financial Services Compensation Scheme (FSCS).

    January 20, 2021 WebPage Regulatory News
    News

    FSB Publishes Work Program for 2021

    FSB published the work program for 2021, which reflects a strategic shift in priorities in the COVID-19 environment.

    January 20, 2021 WebPage Regulatory News
    News

    FCA Issues Update on Move to New Data Collection Platform

    FCA announced that 50% firms have started using the new data collection platform RegData, which is slated to replace the existing platform known Gabriel.

    January 20, 2021 WebPage Regulatory News
    News

    Bundesbank Publishes Derivation Rules for Reporting by Banks

    Bundesbank published Version 5.0 of the derivation rules for completeness check at the form level, with respect to the data quality of the European harmonized reporting system.

    January 19, 2021 WebPage Regulatory News
    News

    FED Revises Capital Planning and Stress Testing Requirements for Banks

    FED finalized a rule that updates capital planning requirements to reflect the new framework from 2019 that sorts large banks into categories, with requirements that are tailored to the risks of each category.

    January 19, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 6488