Notice Type
Consultation on the Proposed Reserves Policy ACC, acting on behalf of the Minister for Accident Rehabilitation and Compensation Insurance, is proposing to amend the Corporation's Reserves Policy. The Government has directed that the ACC scheme continues on a Pay-As-You-Go funding basis. The reviewed reserves policy which the Corporation proposes to recommend to the Minister for ARCI is: Premiums shall be set with the intention of meeting the current cost of claims and administration-related expenses in the year in which the premiums apply (the ``pay-as-you-go'' cost), subject to adjustment relating to the level of reserves as described below. The Scheme shall hold reserves to: (a) Minimise the likelihood that short-term borrowing will be required as a result of: (i) Unfavourable variations from forecast expenditure and/or income; or (ii) The need for working capital; and (b) Allow the progression of premium rates to be smoothed having regard to: (i) Adjustments needed to restore reserves to the target level; and (ii) Expected changes in the pay-as-you-go costs for future years. The target level of reserves at the end of a premium year is the equivalent of 6 months of the subsequent years' pay-as-you-go cost. Premiums may be set at rates other than the pay-as-you-go cost, and reserves may be maintained at levels other than the target, under the following conditions: (a) Reserves shall be restored to the target level over a reasonable period (generally not to exceed 5 years); and (b) A negative reserve shall be eliminated as soon as practicable. The reserves policy only applies to the Employers', Earners' and Motor Vehicle Accounts (and Medical Misadventure in the event of a separate premium for this Account being introduced in future). Under sections 128 of the Accident Rehabilitation and Compensation Insurance Act 1992, members of the public are invited to make written submissions on the proposed reserves policy. A discussion paper explaining the Reserves Policy is available by writing to ACC, P.O. Box 242, Wellington or by contacting Joanne Allan on (04) 460 7367 or the ACC Premiums help-desk on 0800 222 776. Submissions close on Friday, 22 August 1997.
Publication Date
17 Jul 1997

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