Document ID: chunk:federal_register_of_legislation:F2023L00695:body:0:p3
Version: federal_register_of_legislation:F2023L00695
Segment Type: other
Provision Reference: 
Character Range: 5952–9024

transfers or deferred claims liability as defined by this Prudential Standard. This includes (but is not limited to) loyalty bonuses.
12.         The deferred claims liability is an insurance liability related to the suspension of non-urgent or non-essential elective surgery or the voluntary decisions by insureds, practitioners or hospitals to defer procedures. The deferred claims liability estimates the costs of these procedures. This liability is specific for COVID-19, however it may be appropriate in other circumstances as defined by APRA.
13.         In determining the value for outstanding claims liabilities, premiums liabilities, risk equalisation transfers, other insurance liabilities and the deferred claims liability, an insurer must determine a value for the central estimate and risk margin for health insurance business and health-related insurance business. The insurer must therefore calculate and report separately to APRA, central estimates and risk margins for outstanding claims liabilities, premiums liabilities and risk equalisation transfers.[3] An insurer is only required to report the value for other insurance liabilities and the deferred claims liability including the risk margin. However, this should not prevent analysis being undertaken on a basis which is more suitable, taking into account the nature of the data and the particular circumstances of the insurer.
14.         Reinsurance recoverables and expected reinsurance recoveries should not be reduced for the risk of non-performance of the reinsurer as the risk of non-performance is considered in Prudential Standard HPS 114 Capital Adequacy: Asset Risk Charge (HPS 114).
15.         The valuation of each insurance liability reflects the individual circumstances of the private health insurer. In any event, the minimum value of each insurance liability must be the greater of a value that is:
(a)          determined on a basis that is intended to value the insurance liabilities at a 75 per cent level of sufficiency; and
(b)          the central estimate plus one half of a standard deviation above the mean for the insurance liabilities.

The central estimate
16.         The central estimate is intended to reflect the mean value in the range of possible values for the outcome (that is, the mean of the distribution of probabilistic outcomes). The determination of the central estimate must be based on assumptions as to future experience which are:
(a)          made using judgement and experience including having regard to the advice of the Appointed Actuary;
(b)          made having regard to reasonably available statistics and other information; and
(c)          neither deliberately overstated nor understated.
17.         Where experience is highly volatile, model parameters estimated from the experience can also be volatile. The central estimate must therefore reflect as closely as possible the likely future experience of the insurer. Judgement may be required to limit the volatility of the assumed parameters to that which is justified in terms of the