Insurance declarations and exemptions
The Insurance (Prudential Supervision) Act 2010 (IPSA) includes general provisions for declarations and exemptions. These allow flexibility when applying the insurance prudential supervision regime where appropriate, provided certain conditions are met.
Application of exemptions
Information on which exemptions apply to each insurer can be found in the register of licensed insurers in New Zealand.
What we consider
When considering declarations or exemptions, we must take into account the IPSA’s purposes—to promote the maintenance of a sound and efficient insurance sector and promote public confidence in that sector.
These purposes are achieved by:
- establishing a system for licensing insurers
- imposing prudential requirements on insurers
- providing for our supervision of compliance with those requirements
- conferring certain powers on us.
Principles that apply to achieving the IPSA’s purpose
Section 4 of the IPSA details the principles that apply in achieving the IPSA's purpose.
- The importance of:
- insurance to members of the public in terms of their personal or business risk management
- maintaining the sustainability of the New Zealand insurance market
- dealing with an insurer in financial distress or other difficulties in a manner that aims to:
- adequately protect the interests of its policyholders and the public interest; and
- ensure any failure, or possible failure, of the insurer does not have the potential to significantly damage the financial system or the economy of New Zealand
- recognising that:
- it is not a purpose of this Act to eliminate all risk of insurer failure; and
- members of the public are responsible for their own decisions relating to insurance.
- The desirability of:
- providing to the public adequate information to enable them to make those decisions
- consistency in the treatment of similar institutions (while recognising the New Zealand insurance market comprises a diversity of institutions)
- sound governance of insurers
- effective risk management by insurers.
- The need to:
- maintain competition within the insurance sector
- avoid unnecessary compliance costs.
Section 59 Exemption from compliance with solvency standard
Conditions applied to insurers with this exemption are as follows:
- Comply with the requirements specified in the attachment.
- On our request, provide us, within the timeframe reasonably requested, with a calculation of the solvency margin of the New Zealand branch calculated under the relevant New Zealand solvency standard(s) as specified by us. Within this calculation all or part of the capital of the branch may be reported as ‘Head Office Balance’ or similar; and
- Notify us if the overseas standards or requirements (refer below) materially change, and provide evidence on such notification that the overseas standards or requirements have not materially weakened as a result of this change.
Conditions applied to AMP Life Limited
AMP Life Limited:
- has an exemption under Section 119 from compliance with part 2, subpart 3 – statutory funds of life insurers
- [must] maintain a capital base in excess of the prudential capital requirement, as required by paragraph 23 of APRA prudential standard LPS110.
Section 38: Exemption from requirement to supply Fit and Proper certificate upon appointment of new director
We consider it appropriate to grant the exemption because either:
- we are satisfied the law or regulatory requirements of the home jurisdiction provide for an assessment of whether the persons appointed as directors are fit and proper persons to be appointed to that position and provide for the removal of a person from being a director if the overseas supervisor considers that the person is not a fit and proper person to hold the relevant position; or
- the matters in Section 38(2) of the Act may be treated as satisfied as the insurer is incorporated in Australia, Bermuda, Delaware (USA), France, Germany, Illinois (USA), India, Indiana (USA), Japan, the Netherlands and the United Kingdom, which are jurisdictions prescribed in Regulation 5 of the Insurance (Prudential Supervision) Regulations 2010. Nebraska (USA), Rhode Island (USA) and Spain are also jurisdictions that are treated as satisfied in respect of matters in Section 38(2).
We consider it appropriate to grant the exemption when we are satisfied that:
- the insurer is required under the law or regulatory requirements of its home jurisdiction to comply with standards or requirements that relate to the same or similar matters that are covered by the solvency standard or part of the solvency standard to which this exemption relates (the overseas standards or requirements), and
- the overseas standards or requirements:
a. cover the New Zealand business of the insurer; and
b. are, in terms of achieving the purposes of the Act, at least as satisfactory as the solvency standard or part of the solvency standard to which this exemption relates; and
- the nature and extent of prudential supervision that applies in respect of the overseas standards and requirements is, in terms of achieving the IPS Act's purposes, at least as satisfactory as the nature and extent of prudential supervision that applies to insurers incorporated in New Zealand in respect of the solvency standard to which this exemption relates.
Section 60(2A): Exemption from the requirement to have a current financial strength rating that is given by an approved rating agency
We consider it appropriate to grant the exemption because we are satisfied the insurer has ceased to enter into new contracts of insurance as an insurer.
We consider it appropriate to grant the exemption because we are satisfied that either:
- the insurer is required, under the law or other regulatory requirements of its home jurisdiction, to maintain, in respect of its life insurance business, a statutory fund or other arrangement for separating its life insurance obligations from its other obligations; and
- there is no overseas policyholder preference in relation to payments out of, or in respect of, the statutory fund or arrangement; and
- the nature and extent of prudential supervision that applies in respect of the statutory fund or arrangement is, in terms of achieving the Act's purposes, at least as satisfactory as the nature and extent of prudential supervision that applies in respect of statutory funds under subpart 3 of Part 2
- matters in Section 119(2) of the Act may be treated as satisfied as the insurer is incorporated in Australia, which is a jurisdiction prescribed in Regulation 5 of the Insurance (Prudential Supervision) Regulations 2010.
Section 204(4): Exemption for Lloyd's underwriters from the requirements contained in subpart 3 of Part 2 to have statutory funds for life insurance business
We consider it appropriate to grant the exemption under Section 204(4) because, after taking into account the nature of the Lloyd's market, we are satisfied it would be unduly onerous or burdensome to impose the requirement on those underwriters.
Section 220(4) Exemption from the prohibition against certain words in a name
We consider it appropriate to grant the exemption from prohibition from using certain words in their name because we are satisfied that the person:
- will not be carrying on insurance business in New Zealand, and
- has a legitimate reason to use the particular word in the person's name.