The Reserve Bank is consulting on an Issues Paper it released today, as part of the first phase of a comprehensive review of the Insurance (Prudential Supervision) Act 2010 (IPSA) regime.
A copy of the Issues Paper is available here. The consultation period closes on 30 June 2017.
Review outline and timeline
The Reserve Bank has indicated that the review of the IPSA will progress in three broad phases.
This first phase of the review focuses on the identification of potential issues. Stakeholders' submissions on the Issues Paper will be considered along with recommendations arising from the recent International Monetary Fund review of New Zealand's regulatory and supervisory framework for the insurance sector (which are expected to be published in the second quarter of 2017) for the purpose of determining which areas should be taken forward to Phase 2 of the review. This phase may involve workshops and forums to discuss the ideas presented in the Issues Paper.
Phase 2 will take place over 2017 and 2018 and will entail more in-depth analysis of the issues and confirmation of any policy concerns, including the development of options to address them. The key conclusions from Phase 2 will be presented in an Options Paper for further consultation. In the final phase, any legislative change proposals will be developed. Legislative changes are expected to be introduced to Parliament during 2018 at the earliest.
Potential issues for comment
The Issues Paper outlines the rationale, terms of reference and intended process for the review. In addition, the paper provides an illustration of the types of areas that the Reserve Bank considers have the potential to enhance the operation of the IPSA regime, and provides some context and discussion on those areas in sufficient detail so as to enable stakeholders to comment on them and assist in the identification of any further potential concerns. This includes issues relating to:
- the scope of the IPSA in terms of the nature of insurance contracts or entities that are subject to the legislation,
- overseas insurers and whether the current regime adequately protects the interests of New Zealand policyholders and provides a sufficiently level playing field in terms of compliance costs and capital,
- the possible introduction of a statutory fund concept for overseas non-life insurers,
- the effectiveness of the statutory fund framework for life insurers,
- licensed insurers' systems of governance and internal control functions,
- the enforcement regime within the IPSA,
- the distress management powers of the Reserve Bank in Part 4 of the IPSA,
- the framework for the application of minimum capital requirements and the ability to vary or alter prudential capital requirements in response to an insurer's individual circumstances,
- the appropriate application of solvency requirements for overseas insurers,
- the current framework for notification and approval of material transactions and policy changes,
- the current framework for disclosures of financial strength ratings, solvency margin components and ratios, and
- the balance of requirements set out in legislation and those requirements set out using other legislative tools such as regulations, standards and guidance.
In addition, the Reserve Bank is encouraging stakeholders to provide any comments they wish to make on:
- areas of the legislation that may require technical improvements to improve drafting clarity,
- additional areas that could be taken forward under the review, and
- any areas, having regard to the legislative objectives, that unduly restrict competition and innovation.
The review is intended to consider areas where legislative change may be required. As such, the technical content of the current solvency standards are not within the scope of the review.
Further details on the review of the IPSA and the current consultation are available on the Reserve Bank's website here.
If you need any further information on the review, or assistance with your submissions on the Issues Paper, please contact any member of our Insurance team or your usual Bell Gully adviser.
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.