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Regulation of insurance sector

The Insurance (Prudential Supervision) Act 2010 is administered by the Reserve Bank for the purposes of:

(a) promoting the maintenance of a sound and efficient insurance sector; and

(b) promoting public confidence in the insurance sector.

The Act applies to all insurers carrying on business in New Zealand (as defined by the Act) and includes:

  • a licensing system for insurers based on meeting the Act’s prudential requirements;
  • supervision by the Bank of compliance with the prudential requirements; and
  • powers under the Act for the Bank in respect of insurers in financial distress or other difficulties.

View the Insurance (Prudential Supervision) Act 2010 and the Insurance (Prudential Supervision) Act Commencement Order (No 2) 2010. See also insurance information posted on the Bank’s website prior to enactment.

The Insurance (Prudential Supervision) Amendment Bill (the Bill) was introduced to Parliament on 6 November 2012. Through the licensing phase of the Act a number of technical issues have been identified as appropriate for reform. The Bill contains amendments relating to those technical issues, including:

  • requiring the Reserve Bank to keep a register of licensed insurers;
  • empowering the Reserve Bank to give a notice to an insurer that allows the insurer to prepare interim financial information in accordance with requirements other than NZ GAAP; and
  • extending the term of provisional licences of insurers that enter into an insolvency procedure before 7 September 2013.


Regulations

The insurance sector is also subject to regulations.

The regulations relating to:

  • prescribed jurisdictions for home/host regulatory recognition;
  • reassessment requirements for fit and proper certification;
  • matters relating to the disclosure of overseas policyholder preference;
  • limited exemptions for insurers with annual gross written premium less than $1.5 million;
  • deeming certain consumer credit insurance contracts, where issued by a non-life insurer, not to be life policies;
  • prescribed jurisdictions for purposes of certain provisions;
  • certain credit insurance contracts are not life policies; and
  • statutory funds.

can be accessed on the NZ Legislation website.

Standards

There are also various standards that insurers will need to adhere to as part of the prudential requirements of the Reserve Bank.

Fit and proper standard (PDF 292KB)
Solvency Standard for Life Insurance Business (PDF 331KB)
Solvency Standard for Non-life Insurance Business (PDF 250KB)
Solvency Standard for Captive Insurers Transacting Non-life Insurance Business (PDF 225KB)
Solvency Standard for Non-life Insurance Business – AMI Insurance Limited (PDF 235KB)
Policy Position Paper for the Solvency Standard for Non-life Insurance Business (PDF 76KB)
Solvency Standard for Non-life Insurance Business in Run-off (PDF 247KB)
Solvency Standard for Captive Insurers Transacting Life Insurance Business (PDF 395KB)

Regulatory impact analysis

Throughout 2011 and 2012 the Reserve Bank issued five solvency standards. A regulatory impact assessment (PDF 254KB), released in April 2012, estimated the impact of the standardised factor-based approach and compared it with alternative options.