The Reserve Bank of New Zealand (RBNZ) is expecting some merger and acquisition activity as a result of its takeover of insurance licensing in 2013.

In a commentary in its six-monthly Financial Stability Report, the RBNZ says it expects some insurers “may fall short of the standards expected under the new licence requirements” which govern prudential requirements leading to consolidation or market exits.

The report reveals that as a result of the Christchurch earthquake, the RBNZ has accelerated its licensing process for insurers and is “monitoring the sector closely”.

But overall, Reserve Bank Governor Alan Bollard says NZ’s insurance industry is “sound and functioning well”.

The RBNZ says it is monitoring claims developments from the Christchurch earthquake but concludes that the reinsurance support provided by global reinsurers is making the financial consequences of the earthquake “more manageable” for the local economy.

“The bank will continue to assess the implications of the earthquake for the insurance sector over the months ahead,” the report says.