Statutory reporting

Question 1

What is statutory reporting

Answer 1

Involve producing legally required information. a company is legally obliged to produce financial and/or non-financial (reinsurance arrangements, employee numbers, risk minimisation policy) information relating to the company’s business - the format, content and time frame for which is governed by legislation

Question 2

APRA uses of statutory report information

Answer 2

1. Solvency (level of assets in excess of liabilities, quality/liquidity of assets)
2. Reinsurance arrangement
3. Adequacy of the claims provision
4. Capital adequacy

Question 3

Objectives of APRA using reinsurance arrangement information

Answer 3

1. Only retains risk which its capital will support
2. Spreads reinsurance contracts appropriately
3. Ensures the security of reinsruance recoveries

Question 4

ASIC uses of statutory report information

Answer 4

1. Information for making and evaluating decisions about t he allocation of scarce resources is provided
2. The accounts are audited
3. The company is operating as a going concernq

Question 5

Sources of information for statutory reporting

Answer 5

General ledger
Actuaries - preparation of the outstanding claims reserve calculation
Other department - related parties, number of employees etc.

Question 6

Three forms of legislation governing the GI industry

Answer 6

Corporations Act 2001
Insurance Act 1973
APRA prudential standards

Question 7

What does corporation Law applied to

Answer 7

All entities incorporated in the Commonwealth of Australia.

Does not include GI that are Australian branches of overseas entities or Lloyd’s of London underwriters

Question 8

Corporations Act 2001: Section 286 Financial records

Answer 8

Records that support financial statement to be retained for 7 years

Question 9

Corporations Act 2001: Section 295 Annual financial report

Answer 9

Financial report based on accounting standards

Question 10

Corporations Act 2001: Section 298 Annual directors’ report

Answer 10

Direct disclosure and auditors’ declaration

Question 11

Corporations Act 2001: Section 301/07/08 Audit report

Answer 11

Audit opinion and independence declaration to be prepared

Question 12

Corporations Act 2001: Section 314 Report to members

Answer 12

Full or concise report to be sent to shareholders

Question 13

Corporations Act 2001: Section 319 Report to ASIC

Answer 13

Report for a financial year lodged with ASIC

Question 14

Corporations Act 2001: Section 317 AGM

Answer 14

Financial report, directors’ report and the auditor’s report laid for last FY before AGM

Question 15

What does Insurance Act 1973 apply to

Answer 15

Any organization that carried on GI business

Question 16

What does Insurance Act updated in 2001 respond to

Answer 16

Changes in market and policyholder expectations

Question 17

Key points for Corporations Act 2001

Answer 17

1. Annual financial report - FS, note to FS, directors
   declaration
2. In most cases, financial report must be audited
3. Financial report is to be submitted to shareholders and ASIC
4. Disclosing entities must also submit a half-year financial report

Question 18

What reporting requirement does GI companies follow?

Answer 18

AASB 1023

Question 19

Accounting requirement for insurers for whom AASB 1023 does not apply

Answer 19

AAS 26

Question 20

Main areas of disclosure

Answer 20

B/S, Income Statement, Outstanding Claims Liability

Question 21

Disclosure for B/S

Answer 21

1. Outstanding claims liability (Central estimate, risk margin)
2. Reinsurance and other recoveries receivable
3. Gross unearned premium liability
4. Unexpired risk liability
5. Outward reinsurance expense asset or liability
6. Direct premium revenue receivable
7. Inwards reinsurance premium revenue receivable
8. Investments by class of investment (at fair value, where appropriate)
9. Intangible assets relating to acquired insurance contracts
10. Deferred acquisition cost asset
11. Percentage risk margin adopted in determining the outstanding claims liability
12. The probability of adequacy intended to be achieved through adoption of the risk margin

Question 22

Disclosure for profit and loss statement

Answer 22

1. Direct premium revenue
2. Inwards reinsurance premium revenue
3. Reinsurance and other recoveries income
4. Direct claims expense
5. Reinsurance claims expense
6. Outwards reinsurance premiums expense
7. Acquisition costs expense
8. Other underwriting expenses, including claims handling expenses
9. Other underwriting expenses, including claims handling expenses
10. Underwriting result i.e. net premium less net claims and expenses such as acquisition costs, for the year

Question 23

Disclosure for the liability for outstanding claims

Answer 23

1. Central estimate of the expected PV of future payment for claims incurred and component related to the risk margin
2. Percentage risk margin adopted
3. Probability of adequacy
4. Process used to determine the risk margin including risk diversification
5. Actual claims vs. previous estimates from claims development

Question 24

What statutory returns are GI required to submit

Answer 24

APRA returns, Fire Barigade, Workers Compensation, Stamp Duty, Insurance Protection Tax (NSW only), Tax

Question 25

Primary aim of APRA return

Answer 25

Monitor capital adequacy and solvency
Provide statistics and information to both the industry and the public
Reporting to the Treasurer and Parliment

Question 26

APRA versus ASIC: Size

Answer 26

B/S of AASB1023 is 1 page in length with support by way of notes
Form GRF 300.0 -Statement of Financial Position is 8 pages in length

Question 27

APRA versus ASIC: Different Accounting Treatment

Answer 27

e.g. DAC are expensed fully when paid/payable as a component of underwriting expenses per the APRA accounting requirement. Similarly, Deferred Reinsruance expense is not recognized by APRA

Question 28

APRA versus ASIC: Disallowed assets

Answer 28

APRA has specifically excluded some balances from inclusion in reporting the insurers financial position e.g. goodwill, intangible assets, Future Income Tax Benefit (net of provision for deferred tax) and assets under a fixed or floating charge