NZ Insurance (Prudential Supervision ) Bill - Consultation Draft

The proposed new regulator of insurers in New Zealand,

the Reserve Bank of New Zealand, has released a consultation draft

of the Insurance (Prudential Supervision) Bill. The Bill is to be

introduced into Parliament later this year. In this update we

highlight some of the changes to the current regulatory environment

proposed in the Bill.

The draft Bill requires the Reserve Bank of New Zealand (Bank)

to:

Issue licences to every person carrying on insurance business

in New Zealand.

Undertake prudential supervision of licensed insurers.

Enforce the Bill against licensed insurers who fail to comply

with it.

Registration

Every person carrying on insurance business in New Zealand must

hold a licence. A person carries on insurance in New Zealand if the

person or entity:

Is a body corporate, an overseas company liable to be

registered in New Zealand or is ordinarily resident in New

Zealand.

Acts as an insurer in New Zealand.

Is liable to policyholders in New Zealand.

An overseas insurer that is not resident in New Zealand and that

is not a company (eg a Protection and Indemnity Club) appears to be

outside this definition. However, the licensing requirements in the

draft Bill do address unincorporated bodies outside New Zealand.

This express inclusion in the licensing requirements makes it

unclear whether unincorporated bodies outside New Zealand are meant

to be subject to the licensing regime or not.

In order to obtain a licence, the applicant must:

Hold a current credit rating from a credit rating agency

approved by the Bank (reinsurers, captives, small insurers below an

as yet unspecified GWP and start-ups trading for less than a year

are exempt).

Be able to carry on the business in a prudent manner taking

into account their financial resources, level of internal controls,

size and type of risks being insured, level of reinsurance,

non-insurance activities and related party transactions.

Be able to meet the approved solvency standards (to be

specified).

If it is a life insurer, have at least one statutory fund (as

detailed in the draft Bill) in respect of its life insurance

business.

Be able to comply with any proposed conditions upon which the

licence will be granted.

Provide a fit and proper policy to the Bank that governs the

qualifications, requirements and any other criteria that directors

and relevant officers (CEO, CFO and actuary) must have in order to

be appointed to and to continue to hold office in the insurer.

Confirm each proposed...