The Australian Prudential Regulation Authority (APRA) today released a discussion paper dealing with changes to life company financial statements and contract classification.

The discussion paper sets out proposed changes to the prudential reporting of life company financial statements (Prudential Rules No. 35) and a new Prudential Rule (PR) dealing with contract classification.

The revised reporting requirements arise from the introduction in Australia of International Financial Reporting Standards (IFRS) and consequential changes to the Actuarial Standards under the Life Insurance Act 1995 (the Life Act) being made by the Life Insurance Actuarial Standards Board. Prior to the introduction of IFRS, the financial statements for life companies produced in accordance with PR 35 were generally aligned with the requirements of Australian Accounting Standard AASB 1038.

APRA’s member, Mr Steve Somogyi, said that the proposed changes and new rule support the administration of the Life Act and the prudential supervision of the industry by APRA.

“IFRS introduces some discretion in the way that contracts are treated in the accounts, which could lead to equivalent contracts being reported in different ways in regulatory reporting. A separate prudential rule has been developed to ensure that similar products are reported in a like manner for all regulatory reporting by life insurance companies, including friendly societies, in Australia”, he said.

Subject to consultation on the discussion paper, it is expected that the final prudential rules will be released in December 2005 and will apply to financial statements produced in accordance with PR 35 in relation to a financial year of a life company ending on or after 31 December 2005.

APRA invites comments on the discussion paper and draft prudential rules, which are available at http://www.apra.gov.au/Policy/Draft-Prudential-Rules-PR35-and-Contract-classification.cfm. Comments can be sent to pr35@apra.gov.au by 31 October 2005. 
 

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.
APRA is funded largely by the industries that it supervises. It was established on 1 July 1998. APRA currently supervises institutions holding approximately $2.0 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.