The Reserve Bank – Te Pūtea Matua is today relaunching the review of the Insurance (Prudential Supervision) Act (IPSA), and commencing a review of the associated Insurer Solvency Standards.
The IPSA review was deferred due to work on the Reserve Bank of New Zealand Act 1989 Review and the implications of the COVID-19 pandemic. The attached IPSA launch paper sets out the scope of the review, and an anticipated timeline for the project.
The original IPSA legislation became law in September 2010 and there have been a number of notable developments since then, Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
“Since 2010, the Reserve Bank and insurers have gained considerable experience across the legislation, helping us to see what works well and what could be improved.”
Over the next twelve months, we intend to release consultation papers seeking feedback on the scope of the legislation – looking at which organisations and products should be captured, how ‘insurance’ is defined, the treatment of overseas insurers, statutory funds and the solvency regime.
Throughout the process, the Reserve Bank will interact intensively with and seek input from relevant government agencies, industry organisations and professional organisations. An initial substantive consultation paper – on the scope of the Act and its treatment of overseas insurers – is expected to be issued in November 2020.
Review of Insurance Insolvency Standards
The Reserve Bank is also launching a review of the Insurer Solvency Standards that govern the minimum amount of capital that insurers are required to hold.
“Best practice regulation includes monitoring and regularly reviewing existing regulations to ensure they remain robust and fit-for-purpose. The review is designed to help the Reserve Bank fulfil its regulatory stewardship role by monitoring and reviewing New Zealand’s system for measuring and reporting on insurance capital,” Mr Bascand says.
Since the current form of the standards was introduced in 2014, we have seen the IMF’s 2016 review of New Zealand’s financial sector, the Trowbridge-Scholtens review of the Reserve Bank’s supervision of CBL, and the thematic review of the role of the Appointed Actuary regime. The introduction of new insurance accounting standards (IFRS 17) by the International Accounting Standards Board also has a direct bearing on New Zealand solvency standards.
Feedback from insurers and other market participants, and the experience of RBNZ supervisors in overseeing the action of the standards will also be factored into the solvency review.
Feedback sought as Solvency Standard review paper released
A paper has been released setting out the timeline for the project as well as the principles intended to guide the review. We welcome feedback on this from interested parties. A second, substantive consultation paper outlining our response to IFRS 17 and the structure of solvency standards is expected to be issued in December 2020.