Reserve Bank invites feedback on insurance protection

Reserve Bank invites feedback on insurance policyholder protection

The Reserve Bank – Te Pūtea Matua – is seeking engagement on its insurance policyholder security consultation which discusses whether the current legislation gives policyholders the protection that they expect.

An important purpose of New Zealand’s insurance legislation is to promote a financially sound insurance sector, Deputy Governor and General Manager of Financial Stability Geoff Bascand says.

This consultation is part of the Reserve Bank’s wider review of the Insurance (Prudential Supervision) Act (IPSA) 2010 and looks at the parts of the Act that are focussed on policyholder security – reducing the likelihood that an insurer might become unable to make claims payments that they owe to policyholders.

The consultation also looks at the type and breadth of information insurers publish so customers and other interested parties can assess the financial stability of insurers before purchasing a policy. It looks at special arrangements protecting life insurance assets (known as statutory funds) and explores whether aspects of these protections could be extended to other types of insurance.

“The consultation also reviews the legislation governing the amount of capital insurers maintain as a buffer in case of adverse events – otherwise known as their ‘solvency capital’ - and asks whether there should be greater clarity about policyholders’ rights when some policies are terminated early,” Mr Bascand says.

“We also ask whether New Zealand should consider establishing a guarantee fund for some of policyholders’ claims if an insurer fails.”

This consultation gives the public an opportunity to provide feedback on whether the current legislation gives policyholders the security that they expect and we invite anyone interested in the topic to submit their views to us. Given the heightened COVID-19 alert levels, we have extended our consultation window to 15 November 2021. Submissions can be made either through the consultation document process,or the summarised online consultation form.

More information:

• IPSA Policyholder Security non-technical summary (PDF 847KB)
• Review of the Insurance (Prudential Supervision) Act 2010 - Options Paper 2: Policyholder Security (PDF 1.4MB)
• Condensed online IPSA Policyholder Security consultation form
• Reserve Bank invites feedback on scope of Insurance Act and structure of Solvency Standards – November 2020
• Reserve Bank relaunches Insurance Act review – October 2020

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