The Reserve Bank – Te Pūtea Matua – is today welcoming views on an interim Solvency Standard for insurers, which will determine the minimum amounts of capital that insurers must hold.
The interim standard is needed in order to take account of upcoming changes to the accounting rules (IFRS 17) and to incorporate feedback on our current solvency standards. It has been designed so that policyholders can be comfortable that an insurance company has enough funds to meet its promises to policyholders, even if it fails, Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
“Through our review of the standard we have modified some of the ways that we require insurers to calculate their capital needs. This is to ensure greater consistency and clarity in our requirements, and to deal with new accounting standards for the insurance industry,” Mr Bascand says.
“This will bring our method for capturing risks into line with international standards. We will undertake further analysis, in consultation with the industry, as we are keen to understand the capital impact on insurers. We strongly encourage them to engage with the consultation.”
The interim solvency standard is part of a multi-year review of the Insurance Prudential Supervision Act (IPSA) 2010 and its associated Insurer Solvency Standards. The Interim Solvency Standard consultation will be open for 10 weeks until 1 October. The standard will take effect from early 2022 and be in-force for around three years. Its contents have been informed by our supervision of the insurance industry and consultation with industry representatives and the general public.
“The consultations provided us with insightful feedback and we thank all of those who took the time to provide their thoughts and ideas,” Mr Bascand says.
“We look forward to continued engagement with both the public and industry stakeholders as our work on this important regulation progresses.”
The interim solvency standard consultation is being released alongside the feedback received from consultations on the structure of the Solvency Standards and IFRS 17 (the new accounting standard for insurance contracts); and on the Scope of the Insurance (Prudential Supervision) Act 2010 and treatment of overseas insurers; together with our responses to the public submissions received.