AASB 17 and related APRA reporting requirements

It is key for insurers to note that, regardless of their financial year-end, they will need to commence reporting to APRA on an AASB 17 basis from 1 July 2023.  With the change in numbers, there is also a new APRA reporting framework to work through during the months of July 2023 to 30 September 2023.  Details on these new challenges and how Deloitte can help are below.

On 1 January 2023, the new accounting standard for insurance contracts, AASB 17 Insurance Contracts became effective.

APRA has revised its prudential and reporting standards in response to the introduction of AASB 17 and these will come into effect from 1 July 2023.

In Quarter 4 2022 Deloitte published “Integrating AASB 17 into the LAGIC framework for insurers” (APRA’s changes to the prudential framework for general insurers) and “Integrating AASB 17 into Life Insurer Capital and Reporting Frameworks” to summarise the key considerations for general insurers and life insurers respectively.

This blog focuses on the APRA timeline for AASB 17 Integration and resulting reporting requirements, dates, and actions that all insurers should have front of mind in 2023.

High level timeline:

As noted above, insurers will need to commence reporting to APRA (for quarterly, interim, and annual reports) and determining regulatory capital requirements on an AASB 17 basis from 1 July 2023, regardless of their financial year-end. 

The first APRA return on an AASB 17 basis is the September 2023 return due 27 October. For 30 September 2023 quarterly returns, the year-to-date period on AASB 17 basis is:

• 31 March reporter: 1 April 2023 to 30 September 2023
• 30 June reporter: 1 July 2023 to 30 September 2023 
• 30 September reporter: 1 October 2022 to 30 September 2023
• 31 December reporter: 1 January 2023 to 30 September 2023
  

For all insurers, the first annual APRA return for periods ending after 1 July 2023 will be on an AASB 17 basis for the full reporting year (e.g., for an insurer with a 31 December balance date, figures reported in an annual return for the reporting period 1 January 2023 to 31 December 2023 will be on an AASB 17 basis). 

Practical implications

Pre-1 July start of financial year reporters:

Will have to maintain dual sets of accounting records (AASB 1023 / AASB 1038 accounting records for APRA reporting and AASB 17 accounting records for financial reporting). The last APRA return on an AASB 1023 / AASB 1038 basis is the June 2023 return.

1 July and post start of financial year reporters:

June reporters will need to determine their AASB 17 compliant opening balance for 1 July 2022 plus profit or loss for the year ended 30 June 2023 to get the required opening APRA position for 1 July 2023.

September reporters will have to provide their annual return for 1 October 2022 – 30 September 2023 on the AASB 17 basis unless APRA has granted reporters an exemption from submitting their first annual returns as at 30 September 2023 – in which case their first annual returns on a AASB 17 basis would be for the 1 October 2023 – 30 September 2024 financial year as aligned to their first AASB 17 financial reporting. 

In time for the first quarter APRA return deadline of 27 October 2023 (returns are due 20 business days after the end of the reporting period), all insurers will need to have opening balances and profit or loss under AASB 17 approved by Those Charged with Governance (TCWG).  (TCWG) are ultimately responsible for maintaining processes and control over the quality of data submitted to APRA throughout the year and are required to sign a Risk Management Declaration that they are “satisfied with the efficacy of the processes and systems surrounding the production of financial information at the institution” [CPS 220 Risk Management].  

Management should assess if the higher risks of misstatement as a result of the first-time adoption of AASB 17 are appropriately mitigated especially if the flow of financial data and preparation of financial returns do not follow established processes.

The changing APRA reporting framework

APRA is transitioning to APRA Connect as the data collection solution for reporting entities to lodge entity information and data with APRA.

The first release of 12 priority “data collections” (reporting forms) representing 12 Financial Sector (Collection of Data) reporting standards was on 28 March 2023 followed by a second release of 27 reporting forms on 6 June 2023. Taxonomy artefacts were updated with new forms.  APRA is expected to release the remaining 30 forms by 30 June 2023. APRA has indicated that:

1. Entities are expected to be familiar with new reporting forms and to have made necessary changes to internal processes and technology in preparation for the first data submissions due in October 2023. 
2. Entities should use non-production data in APRA Connect Test and submit non-production data that is reflective of the volume expected when actually reporting.

For further information refer to:

• APRA Connect Taxonomy Artefacts here.
  APRA Connect taxonomy artefacts are provided to help entities prepare data for submission on APRA Connect. The artefacts include the data dictionary, validations, reporting taxonomy and XSD (to validate files).

• APRA Connect release notes here.
  The APRA Connect release notes provide details on any updates made to the APRA Connect system.

• APRA webinar on AASB 17 new capital collection reporting in APRA Connect which was streamed 30 March 2023 here. 
  

APRA Connect will be used in parallel with Direct to APRA (D2A) over the next four years. At the completion of the transition to APRA Connect, APRA will be in a position to decommission the D2A data collection system by the end of 2027 (refer link here for further details of APRA's direction for data collections and each industry’s (Life, General Insurance and PHI) roadmap for the creation of new forms and the transition to APRA Connect). 

How Deloitte can help

We have a dedicated AASB 17 trained team to support you with all aspects of AASB 17 accounting, actuarial, implementation and training. 

We also have deep experience in modelling, people and functional process redesign and controls development in core insurance finance and actuarial domains.