Review of the private health insurance capital framework infographic - accessible version

Objective

 

To ensure APRA’s private health insurance capital standards provide for an appropriate level of financial resilience for the protection of policy holders.

APRA is seeking to achieve this through:

 

  • improving the risk sensitivity of the capital requirements so that it reflects the risks faced by individual insurers and the industry as a whole
  • enhancing consistency in the required capital of insurers with a similar risk profile so that comparability between insurers is improved
  • aligning with the prudential capital framework life and general insurers (LAGIC) which reflects APRA’s approach to capital adequacy and international best practice.

Key proposals 

 

Consistency with LAGIC where appropriate, including:

  • LAGIC risk charges
  • 99.5% probability of sufficiency
  • $5m minimum capital requirement
  • More robust capital management and planning requirements

Reflecting PHI specific risks

  • An Insurance Risk Charge designed to reflect the bespoke risks and characteristics of the insurer and the PHI industry – including risk of loss of policy holders, impact of size and growth on future claims liabilities and insurer ability to mitigate risks through corrective actions.

AASB 17

  • The new PHI capital framework will also integrate changes to APRA’s prudential accounting framework arising from the new financial accounting requirements introduced by AASB 17.

Key impacts arising from the proposed PHI capital framework include:

 

  • stronger minimum capital requirements support the long-term financial soundness of private health insurers and the industry, for the benefit of policy holders;
  • all insurers are expected to meet the new PCA without having to raise equity. There is no basis to expect an increase in premiums; and
  • minimal adverse effects on competition.

Timeline

 

  • Q4 2021- release of response package and full QIS
  • Q1 2022 – supplementary release of reporting standards
  • March 2022 – submissions to AASB 17 and PHI capital consultations due
  • Q3 2022 – final standards released
  • 1 January 2023 – AASB 17 comes into effect
  • 1 July 2023 – final standards come into effect

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