Health Insurance (prudential standard) determination No. 4 of 2023 (Cth)

Health Insurance (prudential standard) determination No. 4 of 2023

Prudential Standard HPS 114 Capital Adequacy: Asset Risk Charge

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 114 Capital Adequacy: Asset Risk Charge, 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 114 Capital Adequacy: Asset Risk Charge, comprises the document commencing on the following page.

Prudential Standard HPS 114

Capital Adequacy: Asset Risk Charge Objectives and key requirements of this Prudential Standard This Prudential Standard requires a private health insurer to maintain adequate capital against the asset risks associated with its activities. The ultimate responsibility for the prudent management of capital of a private health insurer rests with its Board of directors. The Board must ensure the private health insurer maintains an adequate level and quality of capital commensurate with the scale, nature and complexity of its business and risk profile, such that it is able to meet its obligations under a wide range of circumstances. The Asset Risk Charge is the minimum amount of capital required to be held against asset risks. The Asset Risk Charge relates to the risk of adverse movements in the value of a fund's on-balance sheet and off-balance sheet exposures. Asset risk can be derived from a number of sources, including market risk and credit risk. This Prudential Standard sets out the method for calculating the Asset Risk Charge. This charge is one of the components of the Standard Method for calculating the prescribed capital amount for private health insurers and their funds.