Capital Management PolicyCapital Management Policy

Capital Management Policy

33. A private health insurer must have, and comply with, a written, board endorsed, capital management policy for each health benefits fund it conducts.
34. The capital management policy must include, but is not limited to:
(a) a capital management plan that must contain:
(i) a description of the board’s risk appetite as it relates to capital needs and the process used to determine that appetite; and
(ii) capital target levels which have regard to paragraph 37, and details of how they are calculated; and
(iii) clearly defined capital trigger points, which have regard to paragraph 37; and
(iv) corrective action options, for each trigger point identified specifying actions and timeframes, for those actions, which a private health insurer may utilise to return capital to capital target levels (identified in subparagraph 34(a)(ii)).
(b) a pricing philosophy, which must include:
(i) profitability targets; and
(ii) direct and explicit consideration of the capital implications of particular profitability levels; and
(iii) guidelines on the speed of correction of deviations from these profitability targets.
(c) investment rules, which must include:
(i) clear objectives; and
(ii) asset allocation limits; and
(iii) asset concentration limits; and
(iv) a consideration of capital strength.
(d) rules stipulating circumstances under which the capital management policy is to be reviewed, which must include changes in:
(i) policy holder growth rates; and
(ii) registration status; and
(iii) net margin; and
(iv) broader economic conditions.
35. The private health insurer must provide APRA with a copy of the capital management policy as soon as practicable after it has been endorsed.
36. The board must review the capital management policy at least every two years and either:
(a) re-endorse the existing capital management policy; or
(b) endorse a new capital management policy.
37. In meeting the requirements in subparagraphs 34(a)(ii) and 34(a)(iii) a private health insurer must use methods designed to protect the health benefits fund and which consider:
(a) access to internal and external capital; and
(b) the impact on premiums of holding more or less capital than the amount determined.