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Division A - Financial Sector (Collection of Data) (reporting standard) determination No. 100 of 2023 - A | Zoe

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Financial Sector (Collection of Data) (reporting standard) determination No. 100 of 2023

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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.

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).

Future Exposure Risk Charge

This is a derived item and is calculated as the sum of:Future Exposure Risk Charge (Health Insurance Business - HIB); andFuture 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.

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; andOther 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; andDeferred Claims Liability Risk Charge.

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.

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; andadjustments to prescribed capital amount as approved by APRA;Less the sum of:aggregation benefit; andtax benefitsThe 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.

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; andtax 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.