Unlocking the potential to grow sustainably is a key challenge for many health insurers, especially in the face of high medical inflation driven by medical advancements, heightened geo-economic uncertainties, and ageing societies. Health insurance has a unique risk profile compared with life and property and casualty insurance. Claims are typically frequent, relatively predictable in normal times, but highly sensitive to utilisation and medical inflation trends. They can also be impacted heavily by external factors such as provider capacity, charges, tariffs, and supply and demand drivers within a healthcare ecosystem. These characteristics can present certain challenges and constraints for health insurers in deploying capital resources efficiently. This article explores the use of a capital optimisation solutions framework that aims to maximise strategic value from available capital resources while ensuring that firms’ regulatory requirements and other business constraints continue to be met.

Key discussion points:

• Capital optimisation challenges: Business mix changes, claims and premium volatility, and medical inflation
• Techniques to address challenges: Business mix monitoring and risk management, reinsurance, and asset-liability matching
• Illustrative analyses: Data sources, modelling approach, and results
• Additional techniques and considerations: Risk-appetite setting, capital models, economic capital frameworks, loss absorbency of deferred taxes, working capital management, and forward-looking solvency capital requirements and balance sheet projections