Document ID: chunk:federal_register_of_legislation:F2024L01523:body:0:p2
Version: federal_register_of_legislation:F2024L01523
Segment Type: other
Provision Reference: 
Character Range: 2907–7040

Interpretation........................................................3
Responsibility for capital management..................................3
Internal Capital Adequacy Assessment Process.........................3
Capital base........................................................6
Prudential Capital Requirement........................................7
Prescribed Capital Amount............................................8
Insurance Risk Charge...............................................8
Asset Risk Charge...................................................8
Asset Concentration Risk Charge......................................8
Operational Risk Charge.............................................9
Aggregation benefit..................................................9
Tax benefits........................................................9
APRA may adjust the Prescribed Capital Amount for calculating the prescribed capital amount......10
Supervisory adjustment.............................................10
Disclosure.........................................................10
Reductions in capital base...........................................11
Materiality.........................................................12
Notification requirements............................................12
Adjustments and exclusions.........................................13
Transition.........................................................13
Determinations made under previous prudential standards...............13
Attachment A – Transitional Arrangements.............................14

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
 1.              This Prudential Standard applies to all private health insurers except where expressly noted otherwise.
 2.              A private health insurer must apply this Prudential Standard separately to each of its health benefits funds and its general fund, in addition to the private health insurer as a whole, 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.
 3.              This Prudential Standard applies to private health insurers from 1 January 2025.

Interpretation
 1.              Terms that are defined in Prudential Standard CPS 001 Defined terms (CPS 001) appear in bold the first time they are used in this Prudential Standard.

Responsibility for capital management
 1.              Capital is the cornerstone of a private health insurer's financial strength. It supports a private health insurer's operations by providing a buffer to absorb unanticipated losses from its activities and, in the event of such losses, enables the private health insurer to continue to meet its insurance obligations.
 2.              As a consequence of the key role played by capital in the financial strength of a private health insurer, the Board of a private health insurer must ensure that:
         1.           the private health insurer as a whole; and
         2.           each fund
    has capital that is adequate for the scale, nature and complexity of its business and its risk profile, such that it is able to meet its obligations under a wide range of circumstances.

Internal Capital Adequacy Assessment Process
 1.              A private health insurer must have in place an Internal Capital Adequacy Assessment Process (ICAAP) that considers each fund as well as the private health insurer as a whole. The ICAAP must:
         1.           be adequately documented, with the documentation made available to APRA on request; and
         2.           be approved by the Board initially, and when significant changes are made.
 2.              A private health insurer's ICAAP must be appropriate to the private health insurer's size, business mix and the complexity of its operations.
 3.          A private health insurer that is part of a group may rely on the ICAAP