A New Zealand interim solvency standard for insurers will come into effect next year after feedback suggested a proposed earlier start date was unnecessary and unworkable.

The interim standard was set to take effect at the start of this year but the Reserve Bank of New Zealand (RBNZ) says it agrees with feedback on the timing, and under a revised schedule it will come into force on balance dates after next January 1, and will apply for around three years.

The revised standard takes account of upcoming changes to the IFRS 17 accounting rules and incorporates feedback on current solvency requirements. It aims to ensure policyholders can be comfortable that an insurance company has enough funds to meet its promises, even in stressed circumstances, RBNZ says.

“We received a large number of written submissions in response to the exposure draft from insurers, industry organisations and other interested parties,” Deputy Governor and GM of Financial Stability Christian Hawkesby said.

“As well as the written submissions, we received a lot of verbal feedback through bilateral meetings and webinars. These comments were greatly appreciated and have helped to refine the interim standard.”

The interim standard will go through further consultation with industry bodies, and external legal and actuarial review, before being finalised in the third quarter. A final solvency standard is expected to be in force from 2025.

RBNZ is also seeking feedback on penalties and enforcement tools available, and on its powers to manage distressed insurers.

The Insurance (Prudential Supervision) Act 2010 includes a range of criminal penalties for non-compliance with regulation, with the consultation discussing the introduction of lighter penalties for less serious offences.

It also suggests tools designed to promote compliance, such as enforceable undertakings and remediation plans.

“A well-designed enforcement framework should provide a range of credible responses to compliance problems so we can respond in a way that is proportional to the issue we’re addressing,” Mr Hawkesby said.

Submissions are due by May 20 and a webinar for interested parties will be held on Tuesday next week.