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Health Insurance (prudential standard) determination No. 5 of 2023

Prudential Standard HPS 115 Capital Adequacy: Insurance Risk Charge

Private Health Insurance (Prudential Supervision) Act 2015

I, Helen Rowell, a delegate of APRA, under subsection 92(1) of the Private Health Insurance (Prudential Supervision) Act 2015 determine Prudential Standard HPS 115 Capital Adequacy: Insurance Risk Charge, in the form set out in the Schedule, which applies to all private health insurers.

This instrument commences on 1 July 2023.
Dated: 24 May 2023

[Signed]

Helen Rowell
Deputy Chair

Interpretation

In this instrument:

APRA means the Australian Prudential Regulation Authority.
private health insurer has the meaning given in section 4 of the Act.

Schedule

Prudential Standard HPS 115 Capital Adequacy: Insurance Risk Charge, comprises the document commencing on the following page.

Prudential Standard HPS 115

Capital Adequacy: Insurance Risk Charge
Objectives and key requirements of this Prudential Standard
This Prudential Standard requires a private health insurer to maintain adequate capital against the insurance risks associated with its insurance activities.
The ultimate responsibility for the prudent management of capital of a private health insurer rests with its Board of directors. The Board must ensure that the private health insurer maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances.
The Insurance Risk Charge is the minimum amount of capital required to be held against insurance risks.
This Prudential Standard sets out the method for calculating the Insurance Risk Charge. This charge is one of the components of the prescribed capital amount for private health insurers.

Table of Contents
Authority
Application and commencement
Interpretation
Insurance Risk Charge
Insurance Liability Risk Charge
Future Exposure Risk Charge
                                                    Future Exposure Risk Charge – Health Insurance Business
Future Exposure Risk Charge – Health-related Insurance Business
Management actions
Discounting of the Future Exposure Risk Charge
Deferred Claims Liability Risk Charge
Tax benefits
Adjustments and exclusions

Authority
     1. This Prudential Standard is made under subsection 92(1) of the Private Health Insurance (Prudential Supervision) Act 2015 (the Act).

Application and commencement
2.             This Prudential Standard applies to all private health insurers except where expressly noted otherwise.
3.             A private health insurer must apply this Prudential Standard separately to each of its health benefits funds and its general fund, unless otherwise noted. The term 'private health insurer' refers to the private health insurer as a whole. The term 'fund' refers to each health benefits fund and the general fund, unless otherwise noted.
4.             This Prudential Standard applies to private health insurers from 1 July 2023.

Interpretation
5.             Terms that are defined in Prudential Standard HPS 001 Definitions appear