Work on Insurance Act Review resumes
The Reserve Bank – Te Pūtea Matua will be relaunching the review of the Insurance (Prudential Supervision) Act (IPSA) in October.
The review began with an industry consultation in 2017 and was set to resume in March this year, but was delayed in-line with the regulatory relief implemented to free up the Reserve Bank and industry participants to support our economy and tackle the challenges created by COVID-19.
“Maintaining a sound and efficient insurance sector is important for New Zealand,” Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
“Customers expect to be able to insure their homes and possessions and obtain life and disability insurance, and businesses utilise a range of insurance products to protect their assets and business interruption exposures,” Mr Bascand said in an address to the Insurance Council today.
“There are approximately 90 licensed insurers operating in New Zealand, and the sector is highly diverse, ranging from large international companies to tiny specialised entities providing services to particular employee or professional groups. The sector covers home and contents, motor vehicle, travel, life, health, disability, credit, income protection, business interruption, and other products or services.”
The original IPSA was enacted in September 2010 to bring New Zealand up-to-date with international standards for prudential regulation. The reasons for enacting IPSA have not changed, and it is good regulatory practice to review legislation to ensure it is working effectively and update it for the lessons learned over the past 10 years, Mr Bascand says.
The first Canterbury earthquake, for example, devastatingly occurred just a few days before the enactment of IPSA, resulting in intense supervisory activity and application of IPSA provisions over many years.
Other recent experiences that will help inform the IPSA review include an International Monetary Fund assessment in 2017 and the independent review of Reserve Bank Supervision of CBL in 2019. Further background and context has been provided by the joint Reserve Bank/Financial Markets Authority review into insurer conduct and culture, and the Thematic Review of the Appointed Actuary regime. The associated Solvency Standards need to be updated for impending changes to accounting standards and the review will consider adopting a mandatory buffer above the minimum solvency level.
A policy paper outlining the resumption of the IPSA Review, and objectives and topics to be covered, will be published in early October. It will provide an updated overview explaining objectives, topics to be covered and an indicative timetable. At the same time, we will also release a consultation paper on principles to guide the review of Solvency Standards.
“We’ll be staying in regular communication with our industry stakeholders as this work progresses -their feedback is crucial to helping us shape the regime in an efficient and effective matter,” Mr Bascand says.
- Speech: Promoting the Soundness and Efficiency of our Insurance Sector: Recommencing the IPSA and Solvency Standard Review
- Issues Paper: Review of the Insurance (Prudential Supervision) Act 2010 - March 2017 (PDF 1MB)
- Reserve Bank releases thematic review of Appointed Actuary role - June 2020
- Life insurance sector explored in latest Bulletin article - January 2020