Reserve Bank receives feedback on vital consultation for insurers

RBNZ said that it aims to promote “sound” insurers – which are businesses that are well-run and are in a solid financial position – so they can pay out when their policyholders make claims.

“The consultation was the third that we have conducted as part of our comprehensive review of the Insurance (Prudential Supervision) Act 2010 (IPSA),” said Christian Hawkesby, RBNZ deputy governor and general manager for financial stability. “The feedback statement we are publishing today was informed by submissions from industry associations, individual insurers and a public webinar. We thank all those that took the time to submit their views.”

The consultation explored the various enforcement powers and penalties RBNZ can use to respond to compliance issues. These include the Reserve Bank’s supervisory powers under IPSA, its role in distress management, and how powers will be unlocked as insurers’ capital declines, also known as the “ladder of intervention”.

According to RBNZ, there was strong support for the general principle that the Reserve Bank should have a more graduated and proportional set of penalties and enforcement tools and support for many of the regulatory tools proposed.

The feedback highlighted the importance of the Reserve Bank being to provide clear policy guidance about how these tools can be used and noted the importance of proper safeguards being in place for the use of its supervisory powers.

RBNZ plans to release its fourth consultation, Governance, Supervisory Processes and Disclosure, in October.