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Thematic review of the appointed actuary role

In June 2020, we published our findings from our thematic review of the appointed actuary role and regime in the New Zealand insurance sector. This page provides a link to the report and what we have done in response to the review.

The role of an appointed actuary

Within the insurance industry, appointed actuaries have a critical legislated role as they measure and report on material risks, which can threaten an insurer's financial condition and solvency.

An appointed actuary also provides impartial advice to an insurer’s board of directors and senior management to help them make sound decisions. This support can greatly strengthen an insurer’s risk and capital management and lead to the increased security of policyholders.

What the review found

Appointed actuaries all had good practices in place to keep their knowledge up to date, and their financial condition reports were highly valued by insurers. Many of the appointed actuaries also had their most important work peer reviewed regularly.

Our two main findings were the need for clarity and guidance around what we expect of the appointed actuary role, and the risk that the role's impartiality could be affected adversely by factors such as the influence of senior management and reporting lines.

Some key areas for improvement we identified included:

  • processes for appointments, absences and reviews to continue with or replace the appointed actuary
  • how prepared the appointed actuary is to manage a crisis
  • identifying and managing conflicts of interest
  • clarity of delegations
  • processes for following up recommendations in the financial condition reports
  • engagement between the insurer's board and the appointed actuary
  • engagement between us and appointed actuaries
  • guidance around our expectations of the appointed actuary role, including explicit expectations regarding their independence and impartiality.

Report link and policy note

You can read our report of the review and the policy note we published at the same time, which set out our expectations of insurers and appointed actuaries.

About the review

Our review into the appointed actuary role and regime is the first time the role has been reviewed since the Insurance (Prudential Supervision) Act (IPSA) was enacted in 2010, and since insurance licensing was completed in 2013.

The review aimed to improve our understanding of how this role works in practice for insurers, actuaries and for us as the regulator. It also aimed to identify potential areas for improvement to make the role and regime more effective.

Who took part

We selected 15 out of 87 licensed insurers to participate in the thematic review. These 15 insurers were chosen based on a range of industry factors, including but not limited to:

  • their size
  • whether they were a branch of an overseas insurer or locally incorporated
  • their predominant type of insurance business
  • whether their appointed actuary was an employee or an external consultant.

How we gathered the information

The steps in our review were:

  • We ran meetings with key stakeholders including professional bodies and other regulators and also held open industry forums.
  • We conducted a desk-based review of the IPSA Section 78 Reports, the Financial Condition Reports and responses to short fact-based surveys. A sub-sample of insurers also provided the actuarial advice given by their appointed actuary for more in-depth analysis.
  • We conducted onsite interviews with appointed actuaries and the key people at each insurer they interacted with regularly.
  • Finally, we analysed more than 2,500 responses from interview questions alongside feedback from key stakeholder groups and the desk-based analysis of actuarial reports and documents.

Next steps

All 15 insurers that participated in the review received individual feedback.

We have agreed with the report's recommendation that we need to strengthen our oversight role.

We are currently considering the improvements that require consultation and legislative change as part of our review of IPSA.