The Reserve Bank – Te Pūtea Matua is today launching dual consultations on the scope of the Insurance Prudential Supervision Act (IPSA) 2010 and associated Insurer Solvency Standards.
Prudential regulation of insurers aims to ensure that insurance companies understand and manage their risks well so that the public can have confidence in the insurance sector and the sector can remain sound and efficient. These consultations provide the opportunity for people to shape parts of the regime to ensure it is modern, efficient and fit-for-purpose.
Two consultation papers are open for feedback from today. These are part of a number of consultations which will cover different aspects of New Zealand’s insurance regulation as part of the multi-year review process.
“Consultation on the scope of IPSA considers the definitions of ‘contract of insurance’ and ‘carrying on business in New Zealand’,” Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
“These definitions determine which entities are required to obtain a license under the Act. The consultation paper discusses whether the definition of insurance contracts remains sufficiently broad to cover new forms of business such as online insurance start-ups, and whether it is clear enough to give industry and the public the guidance they need.”
The consultation paper also covers rules about how overseas insurers are treated. “We are seeking feedback on how best to strike a balance between the benefits for consumers from having overseas insurers competing in the New Zealand market, and ensuring that New Zealand policyholders are properly protected,” Mr Bascand says.
The Insurance Solvency Standards determine the minimum amounts of capital that insurers must hold. The solvency standards have been designed so that policyholders can be comfortable that, even if unexpected adverse outcomes occur, the insurance company has enough funds to meet its promise to policyholders.This consultation looks at how the Standards are structured and applied to insurers, as well as canvassing views on how they can accommodate the new accounting standard for insurance contracts – IFRS 17. The required level of capital will be consulted on at a later stage.
“We welcome feedback from industry participants, policyholders and other interested parties on either or both of these consultations. We’ve created two simple summaries to help people understand these consultations and provide their thoughts. Feedback will be crucial to helping us shape the regime in an efficient and effective matter,” Mr Bascand says.