Prudential Capital Requirement

1. This Prudential Standard establishes a risk-based approach for measuring the capital adequacy of a private health insurer or its funds. This required level of capital for regulatory purposes is referred to as the Prudential Capital Requirement (PCR). The PCR is intended to take account of the full range of risks to which a fund or private health insurer is exposed.
2. A private health insurer must ensure that the private health insurer and each of its funds have a capital base, at all times, in excess of its PCR.
3. The PCR of a fund equals:
   1. a prescribed capital amount as determined by this Prudential Standard; and
   2. any supervisory adjustment determined by APRA under paragraph 41.
4. The prescribed capital amount for a private health insurer is the sum of the prescribed capital amounts of each of its funds.
5. The prescribed capital amount for a health benefits fund of a private health insurer cannot be less than $5 million. There is no minimum prescribed capital amount applicable to the general fund. Where APRA approves an arrangement under section 33 of the Act and subparagraph 33(1)(b)(i) applies, the prescribed capital amount for the health benefits fund of the transferor insurer[1] immediately after the arrangement takes effect[2] is zero.
6. The PCR for a private health insurer is the sum of the PCRs of each of its funds (or such higher amount as determined by APRA under paragraph 41).