Capital Optimisation Framework for Health Insurers

This white paper presents a capital optimisation framework specifically designed for health insurers, emphasizing its role as a strategic tool for efficient capital resource deployment. It outlines the unique risk profile of health insurance, which differs from life and property insurance, and discusses the challenges faced by insurers in managing capital due to factors such as medical inflation and claims volatility. The document details the objectives of capital optimisation, including maintaining sufficient capital to meet regulatory requirements and improving return on capital. It also identifies common business challenges, such as the changing mix of business and claims volatility, and introduces three key capital optimisation techniques: business mix monitoring, effective reinsurance strategies, and asset-liability matching. Each technique is explained in terms of its potential to enhance capital efficiency and support sustainable growth while ensuring compliance with regulatory standards. The paper concludes with illustrative analyses based on data from UK health insurers, demonstrating the practical application of the proposed framework.