Document ID: chunk:federal_register_of_legislation:F2023L00695:body:0:p8
Version: federal_register_of_legislation:F2023L00695
Segment Type: other
Provision Reference: 
Character Range: 20060–23219

of reinsurance cannot be used to reduce premiums liabilities calculated under this Prudential Standard. The cost of reinsurance for future business that has not been written can be used to increase the surplus (or decrease the deficit) in premiums liabilities calculated in accordance with HPS 112 if the reinsurance arrangement is an executed and legally binding contract and if the reinsurance cost has already been recognised under the Australian Accounting Standard. This revised surplus (or deficit) is included as part of the capital base.

Allowance for future reinsurance expense
8.             The estimation of expected reinsurance recoveries in respect of premiums liabilities for which reinsurance has not yet been purchased can assume that the necessary reinsurance related to those liabilities will be purchased and documented. Allowance must be made for the purchase cost of this future reinsurance expense in the premiums liabilities valuation. This assumption must only be made when:
(a)          existing reinsurance arrangements are executed and legally binding contracts;
(b)          the estimated expected reinsurance recoveries relate to the same classes of business that are currently covered by the existing documented reinsurance arrangements; and
(c)          it is fully expected that the reinsurance will be replaced on similar terms when current arrangements expire.

Estimation undertaken on the combined claims experience of several classes of business
9.             The estimation of the value of reinsurance recoverables and expected reinsurance recoveries would normally be undertaken on the basis of each health insurance business and health-related insurance business written by the health insurer. However, there are certain forms of reinsurance where reinsurance recoveries and expected reinsurance recoveries receivable depend on the combined claims experience across classes of business underwritten. In such instances, the estimation will be required to factor in all the individual results for each health insurance business and health-related insurance business covered by the reinsurance arrangements.

[1]  Refer to Attachment A of this Prudential Standard for further details on the assumptions relating to reinsurance recoverables and expected reinsurance recoveries.
[2]  Refer to Attachment A of this Prudential Standard for further details on the assumptions relating to reinsurance recoverables and expected reinsurance recoveries.
[3]  Such reporting is required in statutory reporting (refer to reporting standards made under FSCODA).
[4]  This is also required to comply with reporting standards made under the FSCODA.
[5]  Refer to reporting standards made under the FSCODA for recognition of the reinsurance recoverables and expected reinsurance recoveries. Refer to Prudential Standard HPS 112 Capital Adequacy: Measurement of Capital and HPS 110 Capital Adequacy for detail in respect of capital requirements in relation to these risks.
    [6]  If a private health insurer is exempt from the requirement to appoint an actuary, the private health insurer must make the assessment and comment as