New Zealand’s Insurance (Prudential Supervision) Act has been passed, with the local industry giving the legislation enthusiastic support.

The Act makes the Reserve Bank of NZ the prudential regulator of all insurance providers in the country. It is the first time the NZ industry has been subject to legislated prudential regulation.

Insurance Brokers Association of NZ CEO Gary Young told insuranceNEWS.com.au the legislation provides “a sound basis for supervising insurers”.

“The previous legislation was outdated,” he said. “For example, insurers were required to lodge only a $500,000 deposit to operate in the country, providing no real protection for consumers.

“Anything that increases public confidence in the insurance industry is seen by our members as positive.”

But Mr Young stopped short of calling the Act a radical change for the NZ insurance industry.

“Most major insurers here have offshore parents and are probably already subject to similar prudential supervision,” he said. “Very small companies are exempt, so overall it’s not a major change, except perhaps in imposing greater administration and compliance costs.”

Insurance Council of NZ CEO Chris Ryan says the new legislation is a “positive move”.

“It’s a good thing for the industry,” he told insuranceNEWS.com.au. “It’s been implemented with a lot of consultation on the way through and overall will lift the level of regulation in NZ.”

Mr Ryan says the Act provides “total transparency on all levels of business dealings”.

“Overall it’s a lot of good changes for any insurance company.”

Finance Minister Bill English says the Act’s main purpose is to promote “the maintenance of a sound and efficient insurance sector”.

“Policyholders will benefit from greater certainty that their insurer has sufficient financial strength to ensure it can pay claims when they are made,” he said.