The Australian Prudential Regulation Authority (APRA) has released draft prudential standards that change the capital framework for private health insurance (PHI).

The changes are intended to increase the industry’s financial resilience and confidence that private health insurers can continue to pay all legitimate claims from policyholders even under severe stress.

The proposals increase minimum capital requirements, however the industry already holds capital significantly in excess of the new proposed regulatory minimums. APRA’s assessment is that no insurer would need to increase premiums or raise equity to meet the higher minimum capital requirements.

The proposed new framework is based on the life and general insurance capital framework (LAGIC) which is also currently being reviewed, but adapted to suit the different features of PHI.

APRA expects to release the final standards in the second half of 2022.

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