November 16, 2018 / 4:10 AM / 25 days ago

UPDATE 1-Australian regulator flags higher minimum capital requirements for health insurers

(Adds background, quotes from speech)

By Paulina Duran

SYDNEY, Nov 16 (Reuters) - Australia’s prudential regulator said on Friday it would review whether private health insurers should set aside more capital to protect policy holders, as the industry struggles amidst rising costs and lower membership numbers.

“The review may conclude that minimum regulatory capital requirements should be lifted to better reflect the risks faced by the industry,” Geoff Summerhayes, a board member of the Australian Prudential Regulation Authority (APRA), said in a statement.

The industry is struggling as Australians drop expensive policies amidst rising health care costs, prompting the regulator to ensure the firms can maintain their commitments to customers.

“Holding sufficient capital builds resilience in insurers so that they can survive periods of stress, without jeopardising the protection of their policyholders,” Summerhayes said.

The regulator said it would soon begin consulting private health insurers and expected to release a discussion paper next year. It said not all insurers would need to raise more capital.

“The impact of any change to capital requirements will differ from insurer to insurer, depending on their business model and current capital structure,” Peter Kohlhagen, policy development manager, said in a speech published by the regulator.

“Many have buffers that would be sufficient to absorb the change. Some insurers with thinner buffers may need to source additional capital if capital requirements increase,” he added. (Reporting by Paulina Duran; Editing by Stephen Coates)

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