4Mortgages and charges

4 Mortgages and charges

(1) For the purposes of paragraph 137‑10(3)(b) of the Act, the purpose for which a private health insurer may mortgage or charge an asset of a health benefits fund, or funds, conducted by the insurer is that the mortgage or charge is for the sole purpose of the benefit of the business of the fund or funds. (2) A mortgage or charge referred to in subrule (1) is subject to the conditions that it: (a) only secures a borrowing that is permitted under these Rules; and (b) does not secure a liability that is not a liability incurred, or to be incurred, by the fund, or funds, for the business of the fund or funds; and (c) will not adversely impact on the insurer’s ability to: (i) maintain the capital adequacy of the fund in accordance with the capital adequacy standard; or (ii) comply with a capital adequacy direction given to the insurer; or (iii) maintain the standards of solvency in accordance with the solvency standard; or (iv) comply with a solvency direction given to the insurer. (3) A mortgage or charge is subject to the condition that: (a) the mortgage or charge complies with the insurer’s risk management statements or policies that have been developed with the advice of the insurer’s appointed actuary and approved by the board of the insurer; or (b) before entering into the transaction for the mortgage or charge, the insurer obtains and considers advice from its appointed actuary on the matters referred to in subrule (2) in respect of that mortgage or charge.

Note: Section 137‑15 of the Act provides that a transaction entered into in contravention of section 137‑10 is of no effect unless the Federal Court makes an order in respect of the transaction, or the transaction is included in a class of transactions specified in these Rules to be transactions to which section 137‑15 of the Act applies.