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

    FDIC Proposes Amendments to Real Estate Lending Standards

    FDIC is seeking comments on a rule to amend the interagency guidelines for real estate lending policies—also known as the Real Estate Lending Standards.

    June 15, 2021 WebPage Regulatory News
    News

    ISDA Consults on Implementation of Fallbacks for Certain Swap Rates

    ISDA is consulting on the implementation of fallbacks for the sterling LIBOR ICE Swap Rate and for the USD LIBOR ICE Swap Rate.

    June 11, 2021 WebPage Regulatory News
    News

    BIS and BoE Launch Innovation Hub in London

    BIS and BoE launched the BIS Innovation Hub Center in London, which is the fourth new Innovation Hub Centre to be opened in the past two years.

    June 11, 2021 WebPage Regulatory News
    News

    ESRB Recommends Reciprocation of Certain Macroprudential Measures

    ESRB published recommendations on the reciprocation of macro-prudential measures in Belgium, France, Luxembourg, Norway, and Sweden.

    June 11, 2021 WebPage Regulatory News
    News

    US Agencies Set Out Unified Agenda for Planned Regulatory Actions

    SEC announced that the Office of Information and Regulatory Affairs released the Spring 2021 Unified Agenda of Regulatory and Deregulatory Actions.

    June 11, 2021 WebPage Regulatory News
    News

    EC Publishes Regulation on Key Aspects of Implementation of SA-CCR

    EC published the Delegated Regulation 2021/931, which supplements the Capital Requirements Regulation (CRR or Regulation 575/2013) with regard to the regulatory technical standards specifying the method for identifying derivative transactions with one or more than one material risk driver.

    June 10, 2021 WebPage Regulatory News
    News

    BCBS Consults on Prudential Treatment of Cryptoasset Exposures

    BCBS is consulting on preliminary proposals for the prudential treatment of cryptoasset exposures of banks.

    June 10, 2021 WebPage Regulatory News
    News

    EBA Revises List of Validation Rules for Reporting

    EBA issued a revised list of validation rules under the implementing technical standards on supervisory reporting.

    June 10, 2021 WebPage Regulatory News
    News

    Banking Authorities and Private Sector Collaborate on Wholesale CBDC

    BIS Innovation Hub, BDF, and SNB announced that, together with a private-sector consortium led by Accenture, they will conduct an experiment using wholesale central bank digital currency (wCBDC) for cross-border settlement.

    June 10, 2021 WebPage Regulatory News
    News

    ESAs Publish Amended Implementing Standards on Mapping of ECAIs

    ESAs published two amended implementing technical standards on the mapping of credit assessments of External Credit Assessment Institutions (ECAIs).

    June 10, 2021 WebPage Regulatory News
    RESULTS 1 - 10 OF 7093