Capital adequacy supervisory adjustment Capital adequacy supervisory adjustment amount

Capital adequacy supervisory adjustment amount

27. Capital adequacy supervisory adjustment amount means, on the relevant day:
(a) an amount expressed in dollars; or
(b) a percentage figure; or
(c) a factor; or
(d) an amount, or a description of an amount, derived through another basis for calculating the capital adequacy supervisory adjustment amount;

which is not less than 0, and would not result in a negative amount, determined by APRA (including by the application of specified methodology), upon reasonable grounds.

28. In making a determination about a capital adequacy supervisory adjustment amount, APRA may consider the following examples as being examples of reasonable grounds for the determination of the capital adequacy supervisory adjustment but APRA is not limited in its considerations to those examples:
(a) there is a less than 98 per cent probability that the health benefits fund will meet its prudent liabilities in 12 months’ time; and/or
(b) the health benefits fund’s stress test amount does not make adequate allowance for:
(i) growth in policy holders, including in new markets; and/or
(ii) changes to the fund’s products, including the launch of new products; and/or
(iii) a lack of asset diversification; and/or
(iv) market risk; and/or
(v) mismeasurement of asset values; and/or
(vi) credit risk.
(c) the health benefits fund’s prudent liabilities amount does not make adequate allowance for inherent uncertainty; and/or
(d) the health benefits fund’s operational risk amount does not make adequate allowance for inherent uncertainty; and/or
(e) the health benefits fund’s assets are not valued appropriately; and/or
(f) the private health insurer conducting the health benefits fund does not have adequate data to assess the risks of the fund; and/or
(g) the health benefits fund is exposed to contagion risks from a related party, and the private health insurer has not appropriately considered these risks for the purpose of its obligation under this prudential standard; and/or
(h) the health benefits fund’s capital adequacy maximum default loss has not been appropriately calculated.
29. APRA may determine the same or different capital adequacy supervisory adjustment amounts for the purposes of paragraphs 9(a) and 9(b) of this Prudential Standard.
30. If APRA is satisfied that there are reasonable grounds to make a determination of the capital adequacy supervisory adjustment, APRA must, as soon as practicable after making the determination in relation to the health benefits fund, notify the private health insurer, in writing, of:
(a) the amount, factor or figure determined and the calculation methodology used to determine this amount; and
(b) the reasons for the decision to make a determination including which of paragraphs 9(a) and 9(b) of this Prudential Standard the capital adequacy supervisory adjustment amount applies to.