Document ID: chunk:federal_register_of_legislation:F2023L00689:body:0:p2
Version: federal_register_of_legislation:F2023L00689
Segment Type: other
Provision Reference: 
Character Range: 2841–4878

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.

Operational Risk Charge
6.             The Operational Risk Charge is the minimum amount of capital a fund is required to hold against the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events within the health insurance business and health related insurance business.

Calculation of the Operational Risk Charge
7.             The Operational Risk Charge (ORC) is calculated as follows:
    Where:
(a)          GP1 is accrued premium (gross of reinsurance) for the 12 months ending on the reporting date;
(b)          GP0 is accrued premium (gross of reinsurance) for the 12 months ending on the date 12 months prior to the reporting date;
(c)          NL is the central estimate of insurance liabilities (net of reinsurance) determined in accordance with Prudential Standard HPS 340 Insurance Liability Valuation at the reporting date; and
(d)          |GP1 – GP0| is the absolute value of the difference between GP1 and GP0.
8.             For the purposes of paragraph 7, 'accrued premium' includes all premiums from Health Insurance Business and Health Related Insurance Business. Accrued premium is calculated as follows:
    Where:
(a)          A = Premiums in advance at the end of the specified period - Premiums in advance at the start of the specified period;
(b)          B = Unpaid premiums at the end of the specified period – Unpaid premiums at the start of the specified period; and
(c)          Premiums must be inclusive of relevant levies, loadings and discounts.

Adjustments and exclusions
9.             APRA may, by notice in writing to a private health insurer, adjust or exclude a specific requirement in this Prudential Standard in relation to that private health insurer.