Most Read Contributor in New Zealand, September 2016
Wrinkles identified by the Reserve Bank in the
transitional phases of the Insurance (Prudential Supervision) Act
(IPSA) are to be ironed out in an
amendment Bill, introduced to the House last
We briefly outline the main changes and suggest some
issues for submissions.
Changes to reporting requirements
Currently interim audited individual and group financial
statements must be provided to the Reserve Bank within five months
of the end of the first half of an insurer's accounting
The Bill proposes to reduce this timeframe to three months
(aligning it with the proposed time limits for year-end reporting
in the Financial Reporting Bill) and removes the requirement to
prepare interim financial statements for both a group and a parent
(instead only group interims are required).
The time limit for year-end financial statements will remain at
five months until the Financial Reporting Bill comes into force
– which, for insurers, we expect to be in early 2014, at the
same time as the Financial Markets Conduct Bill.
The Bill also empowers the Reserve Bank, by notice to an
insurer, to allow that insurer's interim financial statements
to be prepared in accordance with (for example) its home
requirements, rather than NZ GAAP.
In addition, the Bill:
tweaks financial strength rating rules, so that insurers
winding down don't need one and an insurer (generally)
won't need to provide its rating to a customer more than
allows the Reserve Bank to require as a licence condition that
an insurer or its directors certify that the insurer complies with
IPSA, its regulations and any other enactments. Currently the
Reserve Bank can require certification in respect of only the
insurer's licence conditions
extends the availability of the provisional licensing regime
for insurers that are subject to an insolvency process
extends the limitation period in respect of an offence under
the Act so that it ends five years after the date the offence was
Apart from the change to the proposed timeframes for preparing
interim financial statements (which is an issue with broader
implications than just for insurers), the matters covered by the
Bill can be regarded as "housekeeping".
However, the Bill may provide the opportunity for insurers to
make submissions for changes to other aspects of the Act which
warrant revision, and can now be properly assessed based on their
experiences of the new legislation. How much so, will depend on the
These matters could include:
that insurers not be subject to the shortened timeframes for
preparation of their full year financial statements (and have a
longer preparation period than other companies under the Financial
Reporting Bill) because of the additional need for the appointed
actuary to prepare a Financial Condition Report to accompany the
full year financial statements
that directors have broader defences from liability on a
winding up for a loss arising from a statutory fund contravention,
including reasonable reliance and no fault defences
that directors have broader defences for breaches by their
insurance company of IPSA's administrative requirements, to
allow for appropriate delegation of such administrative functions,
including clarification that directors can rely on appropriately
appointed employees within their control for functional tasks
that additional exemption powers be granted to the Reserve
Bank. Unlike the Securities Act, which allows the FMA to exempt all
its operative requirements, IPSA allows for exemptions from only a
very limited class of requirements
that the Reserve Bank not be able to impose a requirement that
a substantial proportion (currently 50%) of the insurer's
business be New Zealand insurance policies (we consider that this
is contrary to the objective of New Zealand becoming a financial
services hub), and
removal of the Reserve Bank's broad power to give
directions to other companies within the insurer's group (which
is inconsistent with the separate corporate entity principle and
discouraging of overseas insurers).
The closing date for submissions has yet to be announced.
If you have any questions about the Bill, or would like any
assistance in relation to an insurance supervision issue, please
contact one of the lawyers featured.
The information in this article is for informative purposes
only and should not be relied on as legal advice. Please contact
Chapman Tripp for advice tailored to your situation.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Contractors and principals should ensure they have appropriate insurance coverage instead of relying on indemnity clauses.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).