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What is the ESOS Assurance Fund?
The ESOS Assurance Fund (the Fund) is established under section 45 of The Education Services for Overseas Students Act 2000 (the Act) to protect the interests of current and intending overseas students of registered providers. The Fund was built on an initial Commonwealth grant of $1 million and is now maintained by contributions from education and training providers registered on the Commonwealth Register of Institutions and Courses for Overseas Students (CRICOS). The Fund Manager, PricewaterhouseCoopers, was selected by tender.
More information on the Fund is available at http://esosassurancefund.com.au.
How is my contribution to the Fund determined?
A Contributions Review Panel (the Panel), comprising members appointed by the Minister on the basis of their relevant qualifications and experience, determines the criteria on which providers’ Fund contributions are based.
Each year the Panel assesses draft criteria prepared by the Fund Manager to determine the contributions criteria for the following collection year.
The Fund Manager calculates and collects each provider’s contribution to the Fund based on the criteria determined by the Panel.
Since establishment, the Panel’s view has been that the criteria should remain consistent over time unless there is strong evidence to the contrary. The Panel weighs its desire to maintain the consistency of the criteria and keep the cost to providers at a reasonable level, against the need to ensure that sufficient contributions are collected to enable the Fund to meet its obligations in a particular year, as well as establish a reserve for future claims.
The Panel’s approach is one of considering the likelihood of risk to the Fund and in doing so it takes into account the Fund’s known claims history. It should be noted that the data supporting a particular course of action are not always conclusive.
Content of the contributions criteria
The ESOS Act requires that the contributions criteria must enable the amount of the contribution to reflect, at least to some extent, the risk posed to the Fund by an individual provider. One of the contributions criteria must be whether the provider is a member of a Tuition Assurance Scheme (TAS).
In determining the criteria for a particular year, Panel discussion focuses on a formula for calculating a provider’s contribution to the Fund which was set when the Fund was established.
The model/formula
|
The Base Premium |
Covers the administrative cost of the Fund. It includes Fund Manager fees, consultants’ fees and other Fund expenses such as bank fees, audit fees, website costs and legal fees. |
|
+ |
|
|
The Additional Premium |
Including a component for:
- risk cost [to cover the risk of claims on the Fund];
and
- capital cost [to build the Fund’s reserves].
|
|
- |
|
|
A Discount rate |
To reflect the reduced risk to the Fund for providers who are covered by a Primary Assurance Mechanism (PAM). Providers are considered to have a PAM if they:
- are a member of a Tuition Assurance Scheme (TAS)
- have a Bank Guarantee (BG) or
- have an Indemnity Agreement (IA).
|
Determination of the contributions criteria for 2008
The Panel met on two occasions in September and November 2007 to discuss the Fund Manager’s draft 2008 contributions criteria. A summary of the outcomes of each meeting was made available to Panel members for distribution to peak bodies.
At its meeting on 16 November 2007, the Panel determined the 2008 contributions criteria, to apply to all providers, as:
|
The base premium |
to increase to $510 - from $485 in 2007, in line with average weekly ordinary time earnings (AWOTE). |
|
+ |
|
|
An additional premium |
to remain at 0.75% of a provider’s overseas student fee income for providers with Ministerial exemption, and 0.075% for providers with Primary Assurance Mechanism (PAM). |
The complete 2008 Contributions Criteria are available on the Fund Manager’s website at http://esosassurancefund.com.au.
How much will you pay under the 2008 contributions criteria?
An indication of contributions to the Fund under the 2008 contributions criteria is given below.
|
Overseas student fee income |
PAM or ME |
Base Fee |
Additional
Base Fee |
Additional premium |
Total Payable |
|
$50,000 |
*TAS/IA/BG |
$510.00 |
N/A |
0.075% |
$547.50 |
|
$50,000 |
*ME |
$510.00 |
N/A |
0.75% |
$885.00 |
|
$500,000 |
TAS/IA/BG |
$510.00 |
N/A |
0.075% |
$885.00 |
|
$500,000 |
ME |
$510.00 |
N/A |
0.75% |
$4,260.00 |
|
$1,000,000 |
TAS/IA/BG |
$510.00 |
N/A |
0.075% |
$1,260.00 |
|
$1,000,000 |
ME |
$510.00 |
$1,810 |
0.75% |
$9,820.00 |
|
$2,000,000 |
TAS/IA/BG |
$510.00 |
N/A |
0.075% |
$2,010.00 |
|
$2,000,000 |
ME |
$510.00 |
$1,810 |
0.75% |
$17,320.00 |
*TAS = Tuition Assurance Scheme, IA = Indemnity Agreement, BG = Bank Guarantee, ME = Ministerial Exemption
Panel discussions in 2007
Panel discussions in 2007 focussed on:
- Possible alternative discriminators of risk.
Currently the risk posed to the Fund by an individual provider is based on provider size and PAM coverage. In 2006 Panel members asked about other possible discriminators. While other discriminators had been considered in the past, they had not been used due to lack of data.
- The Fund Manager prepared a paper on risk discriminators based on previous calls on the Fund. The Panel found there was insufficient evidence to change the model on which the criteria were based for 2008.
- Industry should be aware that this type of information is available to the Panel and if subsequent information indicates that differentiation between the various TAS schemes is warranted it will be considered in future years.
- The impact or re-insurance on risk
Providers who, at any time, may be without PAM coverage or ME.
- The Panel supported the Fund Manager’s recommendation for providers who, at any time, may be without PAM or ME. Details are provided in the 2008 Contributions Criteria.
Fixed fees:
- It was agreed that all fixed fees should be increased in line with average weekly ordinary time earnings (AWOTE).
Reinsurance for the Fund
The Fund Manager obtained reinsurance for the Fund in November 2006. The amount of reinsurance gained was $5 million with an excess of $400,000. For the period 3 November 2007 to 3 November 2008 the Fund Manager recommended that an option to increase reinsurance to $10 million with an excess of $400,000 be taken. The Panel supported this option.
It was noted, however, that the increase in the amount of the reinsurance would reduce the probability of ruin of the Fund from 5.5% with the current coverage to 3.2%.
Would you like further information?
If you would like information on the ESOS Assurance Fund and the Panel which is not available on the websites, please contact the ESOS Helpline on (02) 6240 5069.