The Reserve Bank of New Zealand – Te Pūtea Matua (RBNZ) has released a 121 page draft bill to amend the Insurance (Prudential Supervision) Act 2010 (IPSA). This is the latest phase in a lengthy review process that commenced 10 years ago. If enacted, the bill would significantly reshape the prudential framework applying to insurers.
The bill is intended to expand the Bank’s standard‑setting, supervisory, and enforcement powers, introduce a more granular solvency regime, tighten fit and proper and transaction approval requirements, and align insurer distress management with the newer framework for deposit takers. However, there are some changes in the bill that differ from those previously proposed.
Background
In August 2025, Cabinet agreed to recommendations for key amendments to IPSA (see our previous article here), following a lengthy series of consultations that first commenced in 2016 (see our previous article here).
The exposure draft bill is the next step in the process for strengthening IPSA and provides the detail on how the Act is proposed to be amended. As drafted, the amendments would come into force on 1 July 2028.
We outline some of the key points below.
Scope of IPSA and licensing perimeter
Contrary to the previous recommendations, RBNZ no longer recommends that non-operating holding companies be licensed. However, prudential requirements may still apply to holding companies under standards.
As RBNZ recommended, changes are proposed to the definition of a “contract of insurance” to allow regulations to deem classes of contracts to be a contract of insurance and to the definition of “carrying on insurance business in New Zealand” to include New Zealand-based insurers with overseas policyholders. This reflects the policy of broadening the application of IPSA to all New Zealand-based insurers. Conversely, overseas reinsurers and overseas captive will not need to be licensed.
In a new change, an express requirement for knowledge or recklessness would also be added to the offence of carrying on insurance business without a licence.
The concept of “carrying on business in a prudent manner” would be repealed and replaced by a requirement to comply with “prudential obligations”, which include obligations under IPSA, prudential standards, conditions of licence, and anti-money laundering obligations.
Purposes, principles and proportionality
The bill retains IPSA’s existing purposes, but amends the principles that the RBNZ must take into account when performing its functions and exercising its powers, to include proportionality and regard to the practices of overseas supervisors and standards. The RBNZ will be required to publish a new proportionality framework to explain how it will take this principle into account when developing standards. That framework will be the subject of consultation before publication.
Fit and proper regime
As proposed previously, chief risk officers will become subject to the fit and proper framework, and pre-approval will be required from the RBNZ of appointments of directors and relevant officers. Appointing a director or relevant officer without approval will be an offence punishable by a fine of up to NZ$500,000, and the RBNZ will have the power to make an order prohibiting or restricting their operations prior to approval.
Insurers must notify the RBNZ when they become aware of matters raising fit and proper concerns as soon as practicable, and it will be an offence to fail to do so without reasonable excuse.
Transaction approvals
The bill adopts RBNZ’s recommendation of a new, consolidated approval regime for significant transactions. The threshold for change of control transactions will be lowered from 50% or more of voting rights in a licensed insurer to 25% or more, or where a person can appoint at least half of the company directors.
Expanded standard‑making powers
The RBNZ’s powers to issue prudential standards will be expanded to include governance, risk management, disclosure of information, contingency and recovery plans, actuarial advice, other matters such as outsourcing and related part exposures, and any other matters prescribed in regulations.
Supervision and enforcement powers
As expected, the RBNZ will obtain a broader range of supervision and enforcement powers, to expressly allow for a more graduated approach depending on the severity of a breach of IPSA. These align with the existing powers of the RBNZ under the Deposit Takers Act, including the power to conduct on-site inspections without notice, and include increases to maximum fines and penalties.
As noted above, some of the offences under IPSA will now also have an added knowledge requirement, in which case a party will not commit an offence unless the conduct is intentional or reckless.
Consultation
The RBNZ is seeking technical feedback on the detailed drafting of the bill, to seek to ensure that Cabinet’s policy approach is properly reflected and there are no unintended consequences. Submissions are due by 7 July 2026, which in our view is an ambitious timeline given the extensive nature of the changes and the importance of getting the detail right.
We intend to make our own submission and look forward to receiving comments and questions from interested parties.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.
Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
