- The regulator
Reserve Bank of New Zealand (RBNZ), which gains its authority under the Insurance (Prudential Supervision) Act 2010. Any entity that assumes liabilities to New Zealand policyholders under a contract of insurance is an insurer and requires a licence from and is regulated by the RBNZ.
The provision of insurance broking services and other insurance intermediation services is regulated, although no authorisation is required under New Zealand legislation.
The provision of advice or other services in relation to insurance products is regulated and the provider may need to be registered and/or authorised.
- Subsidiary/Branch
Insurers:
- an insurer may be a local entity or a branch of a foreign insurer
- the directors and other relevant officers must be "fit and proper"
- an insurer must hold a current financial strength rating from an approved rating agency.
Brokers, financial advisers & insurance agents – may be a local entity, branch of a foreign broker or individuals.
- FDI restrictions
Yes – consent of the Minister of the Crown is required for acquisition of rights or interests of 25 per cent or more of an entity worth more than NZD100 million.
NZD1.22 = USD 1.00 at 1 January 2014
- Control approvals
Consent of the RBNZ must be obtained for any change of control: control means ? 50 per cent of the company's voting rights.
- Minimum capital
Actual Solvency Capital (ASC):
- Life insurer – ASC of NZD5 million
- General insurer – ASC of NZD3 million ($1 million for captives)
- Risk based capital
Solvency Margin is the excess of Actual Solvency Capital (ASC) over Minimum Solvency Capital (MSC), expressed as a dollar amount.
ASC is the total of capital less deductions from capital.
MSC = Total Solvency Requirement (TSR) less, in the case of life insurance, the aggregate of Policy Liabilities and Other Liabilities.
TSR = sum of capital charges for certain key business metrics including: insurance risk, catastrophe and asset risks (including credit, equity & property risk, foreign currency & interest rate risk, asset concentration risk and reinsurance recovery risk).
Policy Liabilities are valued on a best estimate basis and Other Liabilities are valued under NZ GAAP.
Any likely breach over the next three years must be reported.
- Group supervision
Yes – for subsidiaries of NZ insurers. Insurer subsidiaries must be consolidated and the solvency standards applied to the consolidated group. Non-insurance subsidiaries are treated as related party equity investments, subordinated loans or other obligations.
- Policyholder protection
Life Insurers must maintain and keep distinct and separate from other assets, one or more statutory funds into which all amounts received by the insurer in respect of the business of that fund must be credited. Investments made are assets of the fund.
There is no protection fund for non-life policyholders.
On liquidation of an insurer, (other than from a life insurer's statutory fund) there is no priority for policyholders and the Court has the power to reduce the value of contracts of insurance.
- Portfolio transfers
Yes. The RBNZ may on application approve a transfer of all or part of an insurer's NZ business to another insurer that meets the licensing requirements. The RBNZ must have regard to the policyholders' interests and may request an actuarial report. The transfer takes effect as a novation of each policy.
On insolvency, a liquidator or administrator may apply to the High Court for approval of a scheme of transfer of insurance business.
- Outsourcing
There is no express restriction on outsourcing. However insurers must have a risk management policy and, depending on the nature and scope of the activity to be outsourced, such outsourcing may need to be disclosed by way of a modification to the risk management policy. In addition, the insurer must ensure that at all times it meets the conditions for entitlement to hold its licence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
