Document ID: chunk:federal_register_of_legislation:F2023L00734:body:0:p2
Version: federal_register_of_legislation:F2023L00734
Segment Type: other
Provision Reference: 
Character Range: 2915–5919

'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 in bold the first time they are used in this Prudential Standard.

Insurance Risk Charge
6.             This Prudential Standard sets out the method for calculating the Insurance Risk Charge.
7.             The Insurance Risk Charge for each fund is the sum of the Insurance Liability Risk Charge, the Future Exposure Risk Charge and the Deferred Claims Liability Risk Charge.

Insurance Liability Risk Charge
8.             The Insurance Liability Risk Charge is the sum of:
(a)          the Outstanding Claims Risk Charge as defined in paragraphs 10 to 13;
(b)          the Premiums Liability Risk Charge as defined in paragraphs 14;
(c)          the Risk Equalisation Risk Charge as defined in paragraphs 15 and 16; and
(d)          the Other Insurance Liabilities Risk Charge as defined in paragraphs 17 and 18.
9.             The Insurance Liability Risk Charge applies to the private health insurer's health insurance business (HIB) as well as its health-related insurance business (HRIB).

Outstanding Claims Risk Charge
10.         The Outstanding Claims Risk Charge relates to the risk that the value of the outstanding claims liabilities will be greater than the value determined in accordance with Prudential Standard HPS 340 Insurance Liability Valuation (HPS 340).
11.         The risk charge is calculated by multiplying the outstanding claims liabilities[1] excluding claims settled but not yet paid by the Outstanding claims risk size margin defined in paragraph 13.
12.         The outstanding claims of both HIB and HRIB are subject to the risk margin defined in paragraph 13.
13.         The Outstanding claims risk size margin of a fund is calculated as:

Premiums Liability Risk Charge
14.         The Premiums Liability Risk Charge relates to the risk that the value of the premiums liabilities will be greater than the value determined in accordance with HPS 340. The Premiums Liability Risk Charge is calculated as:
    Where:
(a)          PLRCHIB is the Premiums Liability Risk Charge of the health insurance business and is calculated as:
Where:
(i)            PLHIB is the health insurance business premiums liabilities determined in accordance with HPS 340.
(ii)         HIB Stress % is defined in paragraph 14 (c)
(b)          PLRCHRIB is the Premiums Liability Risk Charge of the health-related insurance business and is calculated as:
Where:
(i)            PLHRIB is the health-related insurance business premiums liabilities determined in accordance with HPS 340.
(ii)         HRIB Stress % is as defined in paragraph 14 (d).
(c)
    Where:
(i)
(ii)
Where:
growtht = HT SEU increase over last 12 months divided by HT SEUs at the reporting date.
growtht-1 = HT SEU increase over prior 12