Insurance Solvency Standards refined by feedback
The Reserve Bank of New Zealand – Te Pūtea Matua has released its decisions in response to submissions received on the Insurance Solvency Standards Principles and Timeline consultation launched late last year.
The Reserve Bank commenced the Insurance Solvency Standards review alongside the Review of the Insurance (Prudential Supervision) Act 2010 (IPSA) in October 2020. Insurer Solvency Standards govern the minimum amount of capital that insurers are required to hold.
“We appreciate all the feedback received in response to the consultation. This has helped us to modify the Insurance Solvency Standards principles to make them more fit for purpose for both the industry, and the Reserve Bank as regulator,” Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
The Solvency Standards principles canvassed included international comparability, the role of capital in absorbing an insurer’s losses, balance sheet risks, and practicality.
The main themes from the submissions received included the imperative for insurers to meet financial obligations to policyholders; balancing the need for consistency of approach across insurers while allowing flexibility where warranted by differences in circumstances, assumptions and methods; and that the Reserve Bank should be explicit about its risk appetite in order to communicate our desired level of conservatism rather than through reference to international peers, Mr Bascand says.
We have modified the principles to address the feedback and are confident they are now robust and comprehensive. The final set of principles are set out in the Principles and Timeline Consultation feedback statement. They will guide the ongoing policy work on the review of solvency standards.
“As a regulator, the Reserve Bank needs to balance soundness with efficiency and support confidence in the sustainability of the sector. Our approach is risk based and does not intend to provide for a zero-failure regime.
“We acknowledge the current strain on resources in the insurance industry in balancing various regulatory reforms with its COVID-19 response. We have worked to factor these demands into the review implementation timelines,” Mr Bascand says.
- Review of Insurance Solvency Standards: Principles and Timeline Consultation feedback statement (PDF 700KB)
- Review of Insurance Solvency Standards: Principles and Timeline Consultation Summary of Submissions (PDF 4.5MB)
- Reserve Bank invites feedback on scope of Insurance Act and structure of Solvency Standards – November 2020
- Non-technical summary: Review of Insurance Solvency Standards: Structure and IFRS 17 (PDF 298KB)
- Consultation paper: Review of Insurance Solvency Standards: Structure and IFRS 17 (PDF 2MB)
- Reserve Bank relaunches Insurance Act review - October 2020
- Speech: Promoting the Soundness and Efficiency of our Insurance Sector: Recommencing the IPSA and Solvency Standard Review