Prudent Liabilities AmountPrudent Liabilities Amount

Prudent Liabilities Amount

12. Prudent liabilities amount of a health benefits fund, means the sum, on the relevant day of the:
(a) outstanding claims liability amount; and
(b) future claims liability amount; and
(c) risk equalisation special account accrued liability amount; and
(d) other liabilities amount.
13. Outstanding claims liability amount of a health benefits fund is calculated in accordance with the following formula:

Outstanding claims liability × (1 + size margin)

14. Outstanding claims liability has the meaning given by the Australian Accounting Standard Board Standard 1023, where:
(a) the risk margin applied produces a 75 per cent probability of adequacy; and
(b) discounting is not applied; and
(c) any outstanding claims liabilities from health\-related business are incorporated; and
(d) receipts from the risk equalisation special account are incorporated.
15. Future claims liability amount of a health benefits fund is calculated in accordance with the following formula:
Future claims liability × (1 + size margin)
16. Future claims liability of a health benefits fund, is the amount calculated, at a 75 per cent probability of adequacy, in accordance with the following calculation:
(a) the sum of:
(i) future cash flows from future claims under current policies; and
(ii) the additional risk margin; and
(iii) the sum of related intangible assets and related deferred acquisition costs;

where all elements of the future claims liability calculation are defined in a manner consistent with the definitions contained in the liability adequacy test set out in the Australian Accounting Standard Board Standard 1023, except that discounting is not applied and the constructive obligation component is not included.

17. Risk equalisation special account accrued liability amount of a health benefits fund is the greater of:
(a) 0.1 × unbilled calculated deficit; and
(b) (1.1 × unbilled calculated deficit) – unbilled gross deficit + billed risk equalisation special account liability.
Where:
Billed risk equalisation special account liability means the amount of risk equalisation special account payments, on the relevant day, for which an invoice from the APRA has been received by the insurer but that have not yet been paid by the insurer.
Risk equalisation special account has the same meaning as in the Act.
Unbilled calculated deficit means the central estimate of the sum of all the amounts calculated for each risk equalisation jurisdiction, and under the following conditions:
(a) in accordance with Part 2, Rule 11(1)(e) of the Private Health Insurance (Risk Equalisation Policy) Rules 2007;
(b) over the period up to the relevant day;
(c) where the risk equalisation special account payments or receipts have accrued but have not yet been paid; and
(d) where an invoice, notice or receipt from APRA has not yet been received by the private health insurer, for that period.
Unbilled gross deficit means the central estimate of the sum of the eligible benefits notionally allocated to the aged-based pool and the high cost claimants pool, calculated for each risk equalisation jurisdiction, and under the following conditions:
(a) in accordance with Part 2, Rule 11(1)(a) of the Private Health Insurance (Risk Equalisation Policy) Rules 2007;
(b) over the period up to the relevant day;
(c) where the risk equalisation special account payments or receipts have accrued but have not yet been paid; and
(d) where an invoice, notice or receipt from APRA has not yet been received by the private health insurer, for that period.
18. Other liabilities amount of a health benefits fund, means the sum of any other liabilities not included in the outstanding claims liability amount, future claims liability amount, or risk equalisation special account accrued liability amount, valued as follows:
(a) individually, at a 98 per cent probability of adequacy, where the balance sheet value of the liability is not less than 2 per cent of the total value of balance sheet liabilities; and
(b) collectively, at least at a 98 per cent probability of adequacy, where the balance sheet value of the liability is less than 2 per cent of the total value of balance sheet liabilities.