Reserve Bank welcomes new insurance responsibilities
Reserve Bank Governor Alan Bollard today welcomed the Cabinet decision that the Bank will take on new responsibilities under a regulatory framework for the prudential regulation of the insurance sector.
The prudential framework will apply to all insurance providers, including life, health and general insurance.
The Bank's role as regulator and supervisor of the insurance sector will include licensing insurers and enforcing disclosure requirements, including a mandatory rating of an insurer's financial strength.
Dr Bollard said the prudential requirements will not be overly prescriptive and will place emphasis on directors' responsibilities to effectively manage the risks within their businesses. The objective of the new prudential requirements will be to encourage the maintenance of a sound and efficient insurance sector that promotes confidence among policyholders.
"The insurance sector is an important part of the financial system which underpins economic activity," Dr Bollard commented. "Policyholders need to have confidence in insurance providers that insurance claims will be honoured. While prudential supervision can never eliminate the possibility of failures within the sector, licensing of all insurance providers helps to ensure that minimum requirements are applied to the sector in a consistent manner."
The Reserve Bank will consult with stakeholders in developing the necessary regulations.
Legislation will be introduced in 2008, and is expected to be brought into force at some point in 2010.
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