A trade body representing New Zealand captive insurers says new legislation creates a double standard by excluding foreign subsidiaries.

NZ Captive Insurance Association President Peter Lowe says the Insurance (Prudential Supervision) Bill regulates only domestic captives, not foreign companies that set up insurance subsidiaries in NZ.

The bill had its first reading in NZ Parliament last week, and was referred to the Finance and Expenditure Committee. A report is due by June 8 of next year.

Foreign captives would not face licensing or be subject to offences under the bill.

There are currently six Australian-owned captives set up in NZ to underwrite the risks of their parent corporations.

Mr Lowe believes foreign-owned captives would welcome regulation but the NZ legislation “is, by default, encouraging an unregulated foreign insurance industry in this country. This will be extremely harmful for NZ’s international financial services reputation.”

Though still regarded as a fledgling industry sector in NZ, there are some 22 captive insurance companies writing $NZ80 million ($63 million) in annual gross premium, including those steered by corporate giants Fonterra and Air New Zealand.

“With the right regulation, within 10 years we believe the industry could grow to 150 captives paying $NZ50 million ($40 million) a year in tax to the Government,” Mr Lowe said.