Health Insurance (prudential standard) determination No. 1 of 2025
Premiums Liability Risk ChargePremiums Liability Risk Charge
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Premiums Liability Risk Charge
- The Premiums Liability Risk Charge relates to the risk that the value of the premiums liabilities will be greater than the value determined in accordance with HPS 340. The Premiums Liability Risk Charge is calculated as:
PLCR subscript HIB plus PLRC subscript HRIB
Where:
- PLRCHIB is the Premiums Liability Risk Charge of the health insurance business and is calculated as:
PL subscript HIB times HIB stress percent
Where:
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PLHIB is the health insurance business premiums liabilities determined in accordance with HPS 340.
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HIB Stress % is defined in paragraph 14 (c)
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PLRCHRIB is the Premiums Liability Risk Charge of the health-related insurance business and is calculated as:
LHHRIB times HRIB stress percent
Where:
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PLHRIB is the health-related insurance business premiums liabilities determined in accordance with HPS 340.
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HRIB Stress % is as defined in paragraph 14 (d).
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HIB stress percent equal size stress plus additional uncertainty stress
Where:
- size stress equals 22.1 percent minus 1.2 percent times log bracket hospital treatment SEUs at the reporting date close bracket
- additional uncertainty stress equals 33 percent times open bracket min open bracket max open bracket growth at time t comma growth at time t minus 1 comma growth at time t minus 2 comma 2.5 percent close bracket minus 2.5 percent comma 15 percent close bracket close bracket.
Where:
growtht = HT SEU increase over last 12 months divided by HT SEUs at the reporting date.
growtht-1 = HT SEU increase over prior 12 months (12-24 months) divided by HT SEUs at the reporting date.
growtht-2 = HT SEU increase over prior 12 months (24-36 months) divided by HT SEUs at the reporting date.
Where a merger has occurred since t-2, growth is to be calculated on the total HT SEU’s for the merged private health insurers, such that only organic growth is captured.
- HRIB stress percent equals 37.9 percent minus 1.2 percent times log open bracket dollar value of health-related insurance business accrued premium for the 12 months ending on the reporting date close bracket