5Borrowings

5 Borrowings

(1) For subsection 137‑10(4) of the Act, a private health insurer must not borrow money for the purposes of the business of a health benefits fund conducted by the insurer unless the borrowing is: (a) by way of a subordinated debt; or

Note: Subordinated debt is defined in rule 3.

(b) by means of a bank overdraft; or
(c) to cover settlement of a transaction for the acquisition of an asset that is to be an asset of the fund, but only where the period of the borrowing does not exceed 90 days and the amount borrowed does not exceed 10% of the value of the assets of the fund following the acquisition; or
(d) otherwise, for the sole purpose of the benefit of the business of the fund, but only where the borrowing would not result in the total amount of principal outstanding under all borrowings, excluding the amount of a subordinate debt, exceeding the greater of 10% of the assets of the fund or 50% of the amount of free assets of the fund.

(2) In this rule, free assets of the fund means assets in excess of the capital adequacy and solvency requirements in accordance with the capital adequacy standard and solvency standard.

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.