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The final phase for PHI Roadmap: capital requirement review

Last week, the Australian Prudential Regulation Authority (APRA) announced that it has started to review the final phase of their ‘PHI Roadmap’.

Consultation is expected to begin sometime next year, and the minimum capital requirements are expected finalised in 2020.

The roadmap for private health insures was divided into three phases;

  • risk management,

  • standards of governance

  • capital requirements for PHIs.

According to prudential regulator’s update, last week the regulator indicated that phase 2 that deals with governance will be rolled out in next year.

The review of the capital requirements will not only consider the minimum capital requirements, but it will also consider aligning the capital framework with that of general insurers.

“Private health insurers have been under duress for several years as declining affordability pushes younger, healthier policyholders out of the system, putting further upward pressure on premiums. In times of stress, holding healthy levels of capital enables insurers to continue honouring their commitments to policyholders. This review will determine whether the existing framework still adequately supports that objective,” APRA executive Board Member Geoff Summerhayes said.

He continued that the review may end with the minimum capital needing to be raised to ‘better reflect the risks of the industry’.

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