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Health Insurance (prudential standard) determination No. 9 of 2023

Prudential Standard HPS 340 Insurance Liability Valuation

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 340 Insurance Liability Valuation, 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 340 Insurance Liability Valuation, comprises the document commencing on the following page.

Prudential Standard HPS 340

Insurance Liability Valuation
Objectives and key requirements of this Prudential Standard
This Prudential Standard sets out requirements for the valuation of insurance liabilities of a private health insurer.
The ultimate responsibility for the valuation of insurance liabilities rests with the Board of the private health insurer.
A private health insurer must value its insurance liabilities in accordance with the principles and methodology set out in this Prudential Standard.
For the purposes of the capital standards and reporting requirements under the Financial Sector (Collection of Data) Act 2001 (FSCODA), a private health insurer's insurance liabilities must be valued in accordance with this Prudential Standard.

Table of Contents
Authority
Application and commencement
Interpretation
Valuation of insurance liabilities
Non-reinsurance recoveries
Adjustments and exclusions
Attachment A - Reinsurance

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, 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.
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.

Valuation of insurance liabilities
6.             A private health insurer must value its insurance liabilities in accordance with this Prudential Standard. The valuation must then be used for the purpose of:
(a)          calculating the private health insurer's prescribed capital amount in accordance with the capital standards; and
(b)          completing the private health insurer's yearly statutory accounts in accordance with reporting