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Note: This page is a representation of information published on the PHIAC website prior to 1 July 2015. This information is provided for reference and research purposes only. 


Under the Private Health Insurance Act 2007, PHIAC establishes and requires private health insurers to comply with capital and prudential standards. Capital Standards aim to ensure insurers are solvent and have enough capital to conduct their operations. Prudential Standards operate to ensure that insurers do not cause or promote instability in the Australian health insurance system and that they conduct their affairs with integrity, prudence and professional skills.

Capital Standards

In September 2013 the Council made new standards to replace previous arrangements in stages from 31 March 2014 to 1 July 2014.

For details about the changes and the review undertaken prior to those changes see the Solvency and Capital Adequacy Standards Review page.

Prudential Standards

Standards Under Discussion

Capital Standards

As part of its regulatory framework, PHIAC has established minimum Solvency and Capital Adequacy Standards under Divisions 140 and 143 of the Private Health Insurance Act 2007 (the Act).

  • Solvency Standard:

    The Solvency Standard aims to ensure that assets of sufficient quantum and quality exist to meet all the liabilities of the fund, as they become due.

    Solvency Standard: Schedule 2 of Private Health Insurance (Health Benefits Fund Administration) Rules 2007

    Regulatory Impact Statement

  • Capital Adequacy Standard:

    The Capital Adequacy Standard aims to ensure that there is sufficient capital within a health benefits fund to enable the ongoing conduct of the business of the fund.

    Capital Adequacy Standard: Schedule 3 of Private Health Insurance (Health Benefits Fund Administration) Rules 2007

    Regulatory Impact Statement

Prudential Standards

PHIAC can establish prudential standards under Division 163 of the PHI Act in relation to prudential matters. Prudential matters include the conduct by an insurer of any of their affairs in such a way as to keep them in a sound financial position, maintain integrity, prudence and professional skill, and not cause or promote instability in the industry. Prudential standards do not include matters relating to the solvency or capital adequacy of health benefits funds. Currently there are four prudential standards, located in the Private Health Insurer (Insurer Obligations) Rules 2009.

  • Governance Standard

    The Governance Standard ensures that as a minimum, the governance requirements applicable to insurers are consistent across like institutions, reflect both domestic and international good practice, and promote sound and prudent management of insurers.

    Governance Standard: Schedule 1 of the Private Health Insurance (Insurers Obligations) Rules 2009
    Explanatory Statement: Purpose of the Standard
    Regulation Impact Statement

    The Governance Standard came into force on 1 January 2010 and requires:

    • insurers to be managed in a sound and prudent manner by a competent board of directors
    • the directors of each insurer to be capable of making reasonable and impartial business judgments in the best interests of the insurer
    • directors to give due consideration to the impact of decisions on policy holders.

    The framework for the Governance Standard was developed in consultation with the Australian Prudential Regulation Authority (APRA), drawing on APRA’s Governance Standard GPS 510 and the Corporate Governance Principles and Recommendations 2007 issued by the Australian Securities Exchange.

  • Appointed Actuary Standard

    The role of the Appointed Actuary is important for both the insurer and PHIAC. In particular, the Appointed Actuary provides additional support and technical advice to insurers while operating as an element of the prudential oversight of the industry by PHIAC. Actuaries taking on the Appointed Actuary role for private health insurers must ensure that they meet the Institute of Actuaries of Australia (IAA) professional requirements and code of conduct.

    Appointed Actuary Standard: Schedule 2 of the Private Health Insurance (Insurer Obligations) Rules 2009

    The Appointed Actuary Standard came into force in April 2007 and requires:

    • insurers to have an Appointed Actuary
    • for that Appointed Actuary to operate subject to the PHI Act and the Appointed Actuary Standard
    • that Appointed Actuaries are involved in or notified of:
      • pricing
      • new product development
      • monitoring and adhering to financial standards
      • applications of certain Australian equivalents to International Financial Reporting Standards
      • preparation of the insurer’s annual financial condition report.

  • Disclosure Standard

    The emphasis of the Disclosure Standard is on comprehensive communication with PHIAC. Its application will increase the protection provided to consumers and beneficiaries of private health insurance policies through more timely prudential supervision of private health insurers.

    Disclosure Standard: Schedule 3 of the Private Health Insurance (Insurer Obligations) Rules 2009

    The Disclosure Standard came into force on 1 January 2011 and requires:

    • that PHIAC is better informed at an earlier stage about unusual events in an insurer
    • the provision of information to enable PHIAC to intervene, if necessary, on a preventative basis in the activities of an insurer.

  • Outsourcing Standard
  • The Outsourcing Standard is effective from 1 October 2012 and requires insurers to comply with minimum requirements when entering into, renewing or renegotiating outsourcing arrangements.

    Outsourcing Standard: Schedule 4 of the Private Health Insurance (Insurer Obligations) Rules 2009

    Regulation Impact Statement

    The requirements of the Outsourcing Standard include:

    • that all registered private health insurers have a board-endorsed outsourcing policy;
    • that insurers implement effective risk management with regard to their outsourcing arrangements;
    • that insurers ensure that PHIAC has access to relevant documentation and information held by their outsourced service providers, including making provision for PHIAC site visits to the service provider when necessary; and
    • notification requirements, stipulating that PHIAC must be notified if insurers enter into or terminate outsourcing arrangements pertaining to their material business activities.