As we indicated in our January 2015 article "New era of supervision of Australian private health insurers", we are continuing to provide updates as the supervision of Australian private health insurers transitions from PHIAC to APRA. In this latest update, we report on APRA's release of its proposed prudential and reporting framework for Australian private health insurers.
It has been proposed that by 1 July 2015 the Private Health Insurance Administration Council (PHIAC) will cease to exist and the prudential supervision of the Australian private health insurance industry that is currently managed by PHIAC under the Private Health Insurance Act 2007 (PHI Act) will be transferred to the Australian Prudential Regulation Authority (APRA).
During January 2015, the Treasury Department undertook a consultation process of the exposure draft of the proposed Private Health Insurance (Prudential Supervision) Bill 2015 (the Bill) as well as the changes that will be made to the current PHI Act. Only ten submissions were received in relation to the Bill. In general, the submissions noted that the functions and powers of APRA to regulate prudential matters largely reflected the existing provisions within the PHI Act and, where there are changes, the changes are relatively minor. The Bill will now proceed to the Federal Parliament for enactment.
As part of the process of APRA taking on powers with respect to private health insurers, on 31 March 2015 APRA released a discussion paper on their proposed prudential and reporting framework for the supervision of private health insurers (the Discussion Paper) along with the draft Prudential Standards, Rules and Reporting Standards. The consultation period is open until 18 May 2015 and written submissions can be made to APRA.
APRA's approach to regulation of private health insurers
As identified in the Discussion Paper, APRA intends to continue the existing prudential requirements, rules and reporting arrangements currently administered by PHIAC without substantive change.
APRA notes that:
- It will not make any changes to the existing capital adequacy and solvency standards for private health insurers before 1 July 2016
- Over time it will begin to review the prudential standards for private health insurers consistent with its periodic review and approach with respect to other financial institutions which it regulates