Review of Insurer Law

The central bank, the Reserve Bank of New Zealand (RBNZ) yesterday released an issues paper for its review of insurance legislation, that is, the Insurance (Prudential Supervision) Act 2010 (IPSA).

Head of Prudential Supervision Toby Fiennes said that the review will look at how well IPSA has performed in achieving a cost-effective supervisory regime for the insurance sector. RBNZ is the prudential supervisor of insurers in the country.

“The first phase of the review focuses on identifying potential issues for more detailed consideration. The issues paper outlines the rationale, terms of reference, intended process and issues identified by the Reserve Bank. We are keen to hear from stakeholders, including whether we have identified the right issues,” he said.

RBNZ says that the review will provide an opportunity to enhance the efficient and effective operation of the regime taking account matters including:

• the experience of the insurance sector, and the RBNZ, with the legislation and supervisory framework, including any unexpected compliance or administrative costs, and any inappropriate impediments to competition and innovation; 
• changes and emerging developments in the New Zealand insurance sector and internationally since IPSA was developed, such as the entry and exit of insurers, and the development of new business models and distribution channels; 
• potential concerns with some aspects of the legislative framework raised with the Reserve Bank by some insurance sector stakeholders; 
• changes to international standards and guidance on insurance regulation and supervision;
• changes to, or recent reviews of, other relevant legislative frameworks and possible opportunities to improve the consistency of the IPSA framework with these frameworks.

Mr Tim Grafton, Chief Executive of the Insurance Council of New Zealand (ICNZ), in a response, said: “The Act was passed over six years ago, so it is timely in light of experiences since then and the pace of change in the sector globally to review matters. Ideally, the review should be conducted independently of the Reserve Bank, but the process they have outlined today provides plenty of scope for input.”

“It is pleasing to see that the RBNZ has identified potential issues to address that have been a concern to us such as contracts that appear to be insurance contracts but which are not. An example is insurance contracts provided by some rental car companies. Such contracts mislead the public and limit their rights,” he added.

“We are also keen to see greater transparency and cost-benefit analysis around RBNZ decision-making,” he said.

Submissions are to be sent to RBNZ by 30 June.

Any change to the law will not be enacted till 2018 at the earliest and the RBNZ has committed to a transition period to manage any changes.