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General PHIAC Circulars
SBA Circulars
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General PHIAC Circulars
Circular No 08/15
Contact Officers:
Hoa Nguyen (02) 6215 7979
email: hoa.nguyen@phiac.gov.au
Replaces Circular: NA
25 June 2008 |
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REVISED PHIAC 2 TEMPLATE
To enable PHIAC to further identify and monitor the risks of a private
health insurer (insurer) and the industry, PHIAC has introduced a new
schedule in the PHIAC 2 Return
(Return). The new schedule, entitled ‘Financial Instruments’,
has been implemented to provide additional information on the nature of
an insurer’s investment portfolio and more detail on the exposure
of an insurer’s assets.
The new schedule does not affect the solvency or capital adequacy reserve
and other schedules remain unchanged. PHIAC believes that the additional
disclosure will not create a substantial compliance burden on insurers.
Details of the nature of the schedule are included below.
This additional information forms a component of PHIAC’s ability
to assess actual and potential impact on an insurer, and the broader industry,
from changes in the investment market. It also reinforces the key principles
and PHIAC’s expectations in relation to insurers’ asset management
practices, as outlined in Circular No 07/27.
These principles promote PHIAC’s focus on the quality of the processes
underpinning the application of an insurer’s investment policy,
its interconnectedness with risk management, and its ability to comply
with legislative requirements.
Completion of this new template is required in respect to the June 2008
quarter and subsequent reports, including Annual Returns.
New Schedule – Financial Instruments
Instructions on the completion of this schedule are as follows:
| Name of Investment |
This is the full name of
the financial instrument. If the entry in the Insurer's Balance
Sheet (Schedule 4) is a combination of various investments, the
name of each investment should be separately identified. |
| PHIAC 2 Balance Sheet Category |
This is the same category as detailed
on Schedule 4. Completion of this column is via a drop down list. |
| Value |
This is the same value as stated
in Schedule 4. If the value in Schedule 4 is the aggregated value
of various investments, then the value of each investment should
be individually identified. |
| Valuation Methodology |
This is how the investment was valued
at the reporting date. Some examples include mark to market, fair
value, cost and face value. |
| Manager |
This is the investment manager that
the insurer uses to manage the investment. |
Nature of Investment |
This is the underlying nature
of the investment. The nature of investment may include, but not
limited to: |
•Deposit account •
Term deposits |
•Cash management trust
• Debentures |
•Direct share investment
• Managed funds/trusts |
•Unsecured notes •Forward
contracts |
•Put/call options
•Warrants |
• Swaps • Futures
contracts |
• Hedged funds •
Corporate issuer bonds |
•Collaterised debt
obligations |
Counterparty |
Counterparty is both a legal and financial
term that refers to the other institution or entity to the investment
contract. |
Counterparty Grade
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The Counterparty Grade is derived from the credit
rating and requires a grading of 1-6 as per the summary table below.
Investments without a grade must be classified as Grade 6. |
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If an investment has a number of grades, the
insurer needs to record the rating attached to the largest value
attributable to the grade. For example: |
"Investment XYZ has a total value
of $100 000 which consists of the following credit rating by S&P:
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$20 000 rated A+
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$50 000 rated BBB+
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$30 000 rated AAA
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The grade to be recorded for investment XYZ would
be 4 (being BBB+), as this is largest component in the investment".
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Product Type
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Off the Shelf:
financial instruments that are available to the general public rather
than specifically designed for the insurer. Possible indications
of Off the Shelf products include the existence of a Product Disclosure
Statement and regular performance update that is available to the
public. |
Tailored:
these are products that are specifically tailored to meet the insureršs
individual needs. Product information and performance update are
generally only available to the insurer. |
Maturity |
The term to maturity, in months, at the end of
the reporting period. For financial instruments with no defined
maturity date and/or are perpetual in nature (for example; direct
share investment, trading account), this cell can be left blank. |
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