Set-off against technical provisions by healthcare insurers

The distinction between receivables from (or a liability to) the Healthcare Insurance Fund on the one hand and the advance funding of healthcare providers on the other has a bearing on whether set-off against the provision for claims is permissible. The question will therefore be addressed below in two parts.

Receivable from (or liability to) the Healthcare Insurance Fund

In accordance with Article 76 of the Solvency II Directive and Title I, Chapter III, of the Solvency II Commission Delegated Regulation, the provision for claims should be calculated as the current value of the outstanding claims relating to claim events that have already occurred (including IBNR). A receivable from (or liability to) the Healthcare Insurance Fund by way of ex-post equalisation is directly included in the best estimate of the provision for outstanding claims. In the case of claim events to which the High Costs Compensation (HCC) still applies, these effects are also included as ex-post equalisation. Unlike the Solvency I principles, the effects of HCC are no longer reported separately in the balance sheet as reinsurance, but are instead directly included in the best estimate of the provision for outstanding claims. The ex-post equalisation contributions should be included in the provision for claims on the basis of realistic assumptions. Insights gained on the basis of portfolio experience may be included in the claims provision.

Advance funding for healthcare providers

In accordance with Article 147(6) of the Solvency II Commission Delegated Regulation, the provision for claims forms the volume measure for the solvency capital requirement (SCR) for the reserve risk of the provision for claims. In accordance with Articles 148 and 149 of the Commission Delegated Regulation, the accompanying volatility parameter is based on a provision for claims in which there has been no set-off. It would not be correct to apply the volatility parameter to another type of provision for claims, as this would incorrectly represent the SCR for the reserve risk. Setting off advance funding to healthcare providers against the provision for claims is therefore not in keeping with Solvency II.

However, provided there is adequate monitoring of the advance funding of work in progress (WIP), no SCR need be calculated for counterparty default risk. The monitoring can be carried out by using the WIP Grouper of DBC Maintenance or another instrument that can be shown to calculate the work in progress with the same degree of accuracy. This enables an insurer to achieve zero counterparty default risk resulting from advance funding.