Financial Sector (Collection of Data) (reporting standard) determination No. 100 of 2023
Reporting Standard HRS 110.0 Prescribed Capital Amount
Financial Sector (Collection of Data) Act 2001
I, Michael Murphy, delegate of APRA, under paragraph 13(1)(a) of the Financial Sector (Collection of Data) Act 2001 (the Act) and subsection 33(3) of the Acts Interpretation Act 1901, determine Reporting Standard HRS 110.0 Prescribed Capital Amount, in the form set out in the Schedule, which applies to the financial sector entities to the extent provided in paragraph 3 of the reporting standard.
Under section 15 of the Act, I declare that the reporting standard shall begin to apply to those financial sector entities on the day it is registered on the Federal Register of Legislation.
This instrument commences upon registration on the Federal Register of Legislation.
Dated: 26 May 2023
Michael Murphy
General Manager - Chief Data Officer (Acting)
Technology and Data Division
Interpretation
In this Determination:
APRA means the Australian Prudential Regulation Authority.
Federal Register of Legislation means the register established under section 15A of the Legislation Act 2003.
financial sector entity has the meaning given by section 5 of the Act.
Schedule
Reporting Standard HRS 110.0 Prescribed Capital Amount comprises the document commencing on the following page.
Reporting Standard HRS 110.0
Prescribed Capital Amount
Objective of this Reporting Standard
This Reporting Standard sets out the requirements for the provision of information to APRA relating to a private health insurer’s prescribed capital amount.
It includes associated specific instructions must be read in conjunction with Prudential Standard HPS 110 Capital Adequacy (HPS 110).
Authority
- This Reporting Standard is made under section 13 of the Financial Sector (Collection of Data) Act 2001.
Purpose
2. The information reported to APRA under this Reporting Standard is used by APRA for the purpose of prudential supervision including assessing compliance with capital standards.
Application and commencement
3. This Reporting Standard applies to all private health insurers. This Reporting Standard applies for reporting periods ending on or after 1 July 2023.
Information required
4. A private health insurer must provide APRA with the information required by this Reporting Standard for each reporting period.
Method of submission
5. The information required by this Reporting Standard must be given to APRA:
(a) in electronic format using an electronic method available on APRA’s website; or
(b) by a method notified by APRA prior to submission.
Reporting periods and due dates
6. Subject to paragraph 7, a private health insurer must provide the information required by this Reporting Standard:
(a) in respect of each calendar quarter (i.e. the periods ending 30 September, 31 December, 31 March and 30 June); and
(b) in respect of each year ending 30 June.
7. If, having regard to the particular circumstances of a private health insurer, APRA considers it necessary or desirable to obtain information more or less frequently than as provided by subparagraph 6(a) or 6(b), APRA may, by notice in writing, change the reporting periods, or specify reporting periods, for the particular private health insurer.
8. The information required by this Reporting Standard must be provided to APRA:
(a) in the case of quarterly information, within 28 calendar days after the end of the reporting period to which the information relates;
(b) in the case of annual information, by 30 September each year; or
(c) in the case of information provided in accordance with paragraph 7, within the time specified by notice in writing.
9. APRA may, in writing, grant a private health insurer an extension of a due date, in which case the new due date will be the date on the notice of extension.
Note: For the avoidance of doubt, if the due date for a particular reporting period falls on a day other than a usual business day, a private health insurer is nonetheless required to submit the information required no later than the due date.
Quality control
10. All information provided by a private health insurer under this Reporting Standard must be subject to systems, processes and controls developed by the private health insurer for the internal review and authorisation of that information. It is the responsibility of the Board and senior management of the private health insurer to ensure that an appropriate set of policies and procedures for the authorisation of information submitted to APRA is in place.
Annual audit requirements
11. The information submitted for the purposes of paragraph 8(b) is to be subject to external audit to ensure consistency with the private health insurer’s statutory financial accounts and faithful application of the capital standards.
12. Audit certification and opinion must be provided to APRA by 30 September each year.
13. If a private health insurer received a qualified auditor’s report for a health benefits fund, the general fund or the private health insurer for the previous year (previous report), the current year’s auditor report must state whether the auditor has examined the issues identified and is satisfied that the private health insurer has taken the appropriate steps to rectify the matters raised in the previous report.
14. The auditor’s report must:
(a) state details of the program adopted to carry out the audit; and
(b) include the name of, and be signed by, the auditor who takes responsibility for the accuracy of the report.
Authorisation
15. A person who submits the information required under this Reporting Standard must be suitably authorised by an officer of the private health insurer.
Variations
16. APRA may, in writing, vary the reporting requirements of this Reporting Standard in relation to a private health insurer.
Interpretation
17. In this Reporting Standard:
(a) unless the contrary intention appears, words and expressions have the meanings given to them in Prudential Standard HPS 001 Definitions (HPS 001); and
(b) the following definitions are applicable:
APRA means the Australian Prudential Regulation Authority established under the Australian Prudential Regulation Authority Act 1998;
capital standards means the prudential standards which relate to capital adequacy, as defined in HPS 001;
officer has the same meaning as in the Private Health Insurance (Prudential Supervision) Act 2015;
private health insurer has the same meaning as in the Private Health Insurance (Prudential Supervision) Act 2015; and
reporting period means a period mentioned in paragraph 6 or, if applicable, paragraph 7.
18. Unless the contrary intention appears, a reference to an Act, Prudential Standard, Reporting Standard, Australian Accounting or Auditing Standard is a reference to the instrument as in force from time to time.
Reporting Standard HRS 110.0
Prescribed Capital Amount
A private health insurer must apply this Reporting Standard separately to each of its health benefits funds and its general fund. The term private health insurer refers to the private health insurer as a whole. The term fund refers to each health benefits fund and general fund, unless otherwise noted.
Tables described in this reporting standard list each of the data fields required to be reported. The data fields are listed sequentially in the column order that they will appear in the reported data set. Constraints on the data that can be reported for each field have also been provided.
Terms highlighted in bold italics indicate that the definition is provided in these instructions.
A
Adjustments to prescribed capital amount as approved by APRA | These are adjustments made to a fund’s prescribed capital amount if APRA is of the view that the Standard Method for calculating the prescribed capital amount does not produce an appropriate outcome in respect of a fund, or if a private health insurer has used inappropriate judgement or estimation in calculating the prescribed capital amount for that fund. Approved adjustments are to be reported separately in Reporting Standard HRS 111.0 Adjustments and Exclusions highlighting the description of the adjustment given, transitional status and amount of adjustment applied. |
Aggregation benefit | The aggregation benefit makes an explicit allowance for diversification between asset and insurance risks in the calculation of the prescribed capital amount. This must be determined in accordance with HPS 110. This is distinct from the DCL aggregation benefit referenced in Prudential Standard HPS 115 Insurance Risk Charge (HPS 115). |
Asset Concentration Risk Charge | The Asset Concentration Risk Charge is the minimum amount of capital required to be held against asset concentration risks. The Asset Concentration Risk Charge relates to the risk resulting from investment concentrations in individual assets or large exposures to individual counterparties or groups of related counterparties resulting in adverse movements in the fund’s capital base. It is determined in accordance with Prudential Standard HPS 117 Capital Adequacy: Asset Concentration Risk Charge. |
Asset Risk Charge | 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 the capital base due to credit or market risks. This amount is to be determined in accordance with Prudential Standard HPS 114 Asset Risk Charge (HPS 114). |
Asset Risk Charge - aggregated risk charge component | A private health insurer must calculate, for each of its funds, the risk charge components, as defined in HPS 114, by considering the impact on the capital base of the fund of a range of stresses. These risk charge components are then aggregated using the formula set out in HPS 114. The result of applying the formula is defined as the Asset Risk Charge - aggregated risk charge component. |
Asset Risk Charge - impact of diversification | The Asset Risk Charge - impact of diversification relates to the recognition of diversification benefits between the Asset Risk Charge components as set out in HPS 114. This item must be calculated as the sum of the risk charge components less the Asset Risk Charge - aggregated risk charge component. |
D
Deferred claims liability risk charge | The Deferred claims liability (DCL) risk charge relates to the risk that the value of the DCL will be greater than the value determined in accordance with Prudential Standard HPS 340 Insurance Liability Valuation (HPS 340). This amount is to be determined in accordance with HPS 115 and should correspond to the total calculated in Reporting Standard HRS 115.0 Insurance Risk Charge (HRS 115.0). |
F
Future Exposure Risk Charge | This is a derived item and is calculated as the sum of: - Future Exposure Risk Charge (Health Insurance Business - HIB); and
- Future Exposure Risk Charge (Health-Related Insurance Business - HRIB).
|
Future Exposure Risk Charge (HIB) | The Future Exposure Risk Charge (HIB) relates to the risk that financial performance of the health insurance business a may be materially worse than expected. The Future Exposure Risk Charge (HIB) quantifies the amount of capital needed should a set of standardised industry stresses occur. This amount is to be determined in accordance with HPS 115 and should correspond to the total calculated in HRS 115.0. |
Future Exposure Risk Charge (HRIB) | The Future Exposure Risk Charge (HRIB) relates to the risk that financial performance of the health-related insurance business a may be materially worse than expected. The Future Exposure Risk Charge (HRIB) quantifies the amount of capital needed should a set of standardised industry stresses occur. This amount is to be determined in accordance with HPS 115 and should correspond to the total calculated in HRS 115.0. |
G
General fund | Has the same meaning as in HPS 001. |
H
Health benefits fund | Has the same meaning as in the Private Health Insurance (Prudential Supervision) Act 2015. |
I
Insurance Liability Risk Charge | The Insurance Liability Risk Charge is a derived item and is calculated as the sum of: - Outstanding Claims Liabilities Risk Charge;
- Premiums Liabilities Risk Charge;
- Risk Equalisation Risk Charge; and
- Other Insurance Liabilities Risk Charge.
|
Insurance Risk Charge | The Insurance Risk Charge is the minimum amount of capital required to be held against insurance risks. The method for determining the Insurance Risk Charge is set out in HPS 115. For Table 1, this is a derived item and is calculated as the sum of: - Insurance Liability Risk Charge;
- Future Exposure Risk Charge; and
- Deferred Claims Liability Risk Charge.
|
O
Outstanding Claims Liabilities Risk Charge | The risk charge for Outstanding Claims Liabilities relates to the risk that the value of total outstanding claims liabilities will be greater than the value determined in accordance with HPS 340. This amount is to be determined in accordance with HPS 115 and should correspond to the total calculated in HRS 115.0. |
Operational Risk Charge | The Operational Risk Charge is the minimum amount of capital required to be held against operational risks. The Operational Risk Charge relates to the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events. It is determined in accordance with Prudential Standard HPS 118 Capital Adequacy: Operational Risk Charge. |
Other Insurance Liabilities Risk Charge | The risk charge for Other Insurance Liabilities relates to the risk that the value of other insurance liabilities will be greater than the value determined in accordance with HPS 340. This amount is to be determined in accordance with HPS 115. |
P
Premiums Liabilities Risk Charge | The risk charge for Premiums Liabilities relates to the risk that the value of premiums liabilities 12 months after the reporting date will be greater than the value determined in accordance with HPS 340. This amount is to be determined in accordance with HPS 115 and should correspond to the total calculated in HRS 115.0. |
Prescribed capital amount | The prescribed capital amount is a derived item determined in accordance with HPS 110. It is calculated as the sum of: - Insurance Risk Charge;
- Asset Risk Charge;
- Asset Concentration Risk Charge;
- Operational Risk Charge; and
- adjustments to prescribed capital amount as approved by APRA;
Less the sum of: - aggregation benefit; and
- tax benefits
The prescribed capital amount for a health benefits fund is subject to a minimum of $5 million, and will be automatically applied where the calculated sum of risk charge components is less than this amount. |
R
Risk charge components | The risk charge components, as set out in HPS 114, are calculated by determining the fall in the capital base of the regulated institution in seven stress tests. |
Risk Equalisation Risk Charge | The risk charge for Risk Equalisation relates to the risk that the value of the net risk equalisation transfers will be less favourable than the value determined in accordance with HPS 340. This amount is to be determined in accordance with HPS 115 and should correspond to the total calculated in HRS 115.0. |
Tax benefits | Tax benefits makes recognition for the future shareholder tax benefits arising from losses occurring within the Insurance Risk Charge and Asset Risk Charge. Tax benefits must be calculated as the sum of: - tax benefits from Asset Risk Charge; and
- tax benefits from Insurance Risk Charge;
Less: - tax benefits aggregation reduction.
Tax benefits must only be recognised to the extent that tax legislation allows them to be absorbed by existing deferred tax liabilities. |
Tax benefits from Asset Risk Charge | This represents the tax benefits from the Asset Risk Charge resulting from scenarios modelled by the stress tests in HPS 114, reduced to allow for the reduction in Asset Risk Charge due to the asset risk aggregation formula. Tax benefits from Asset Risk Charge must be determined in accordance with HPS 110. |
Tax benefits from Insurance Risk Charge | This represents the tax benefits from the Insurance Risk Charge resulting from losses in the Insurance Risk Charge in HPS 115. Tax benefits from Insurance Risk Charge must be determined in accordance with HPS 110. |
Tax benefits aggregation reduction | Overall tax benefits are to be reduced to allow for aggregation between the Asset Risk Charge and Insurance Risk Charge. Tax benefits from aggregation reduction must be determined in accordance with HPS 110. |
Table 1: Prescribed Capital Amount (HBF, GF)
Reporting basis
Report information related to each fund’s prescribed capital amount. This table applies to health benefits funds and the general fund.
Units of measurement
Report the dollar values in this table in whole Australian dollars.
Column 1 | Report the value for each of the items listed below. |
- Insurance Risk Charge
Item 1 | The Insurance Risk Charge is a derived item and is calculated as the sum of items 1.1, 1.2 and 1.3. |
Item 1.1 | The Insurance Liability Risk Charge is a derived item and is calculated as the sum of items 1.1.1 and 1.1.4. |
Item 1.1.1 | Report the Outstanding Claims Liabilities Risk Charge. |
Item 1.1.2 | Report the Premiums Liabilities Risk Charge. |
Item 1.1.3 | Report the Risk Equalisation Risk Charge. |
Item 1.1.4 | Report the Other Insurance Liabilities Risk Charge. |
Item 1.2 | The Future Exposure Risk Charge is a derived item and is calculated as the sum of items 1.2.1 and 1.2.2. |
Item 1.2.1 | Report the Future Exposure Risk Charge (HIB). |
Item 1.2.2 | Report the Future Exposure Risk Charge (HRIB). |
Item 1.3 | Report the Deferred Claims Liability Risk Charge. |
2. Asset Risk Charge
Item 2 | Report the Asset Risk Charge. |
Item 2.1 | Report the Asset Risk Charge - aggregated risk charge component. |
Item 2.2 | Report the Asset Risk Charge - impact of diversification. |
3. Asset Concentration Risk Charge
Item 3 | Report the Asset Concentration Risk Charge. |
4. Operational risk charge
Item 4 | Report the Operational Risk Charge. |
5. Aggregation benefit
Item 5 | Report the aggregation benefit. An aggregation benefit which would result in a decrease to the prescribed capital amount should be reported as a positive value. |
6. Tax benefits
Item 6 | Report the tax benefits. |
Item 6.1 | Report the tax benefits from Asset Risk Charge. |
Item 6.2 | Report the tax benefits from Insurance Risk Charge. |
Item 6.3 | Report the tax benefits aggregation reduction. |
7. Adjustments to prescribed capital amount as approved by APRA
Item 7 | Report the adjustments to prescribed capital amount as approved by APRA. Report adjustments that would result in an increase to prescribed capital amount as a positive value. |
8. Prescribed capital amount
Item 8 | The Prescribed capital amount is a derived item and is calculated as the sum of: - Item 1;
- Item 2;
- Item 3;
- Item 4; and
- Item 7
less: The prescribed capital amount for a health benefits fund is subject to a minimum of $5 million, and will be automatically applied where the calculated sum of risk charge components for a health benefits fund is less than this amount. |
Table 2: Prescribed Capital Amount (Private Health Insurer)
Reporting basis
Report information related to the private health insurer’s prescribed capital amount.
Units of measurement
Report the dollar values in this table in whole Australian dollars.
Column 1 | Report the value for each of the items listed below. |
1. Insurance Risk Charge
Item 1 | Report the Insurance Risk Charge. |
2. Asset Risk Charge
Item 2 | Report the Asset Risk Charge. |
3. Asset Concentration Risk Charge
Item 3 | Report the Asset Concentration Risk Charge. |
4. Operational Risk Charge
Item 4 | Report the Operational Risk Charge. |
5. Aggregation benefit
Item 5 | Report the aggregation benefit. An aggregation benefit which would result in a decrease to prescribed capital amount should be reported as a positive value. |
6. Tax benefits
Item 6 | Report the tax benefits. |
7. Adjustments to prescribed capital amount as approved by APRA
Item 7 | Report the adjustments to prescribed capital amount as approved by APRA. Report increases in the prescribed capital amount as positive values. |
8. Prescribed capital amount
Item 8 | The prescribed capital amount is a derived item and is calculated as the sum of: - Item 1;
- Item 2;
- Item 3;
- Item 4; and
- Item 7
less: The prescribed capital amount for a private health insurer will be automatically increased where the calculated sum of risk charge components is less than the minimum of $5 million for a health benefits fund of the private health insurer. |