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NZ regulator resumes insurance laws review

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The Reserve Bank of New Zealand (RBNZ) will resume its review of the Insurance (Prudential Supervision) Act (IPSA) and associated Solvency Standard next month.

The review was supposed to have started in March but was put on hold when the coronavirus pandemic broke out, forcing the regulator to change its priorities.

RBNZ Deputy Governor Geoff Bascand says a policy paper will be published early next month outlining the objectives and topics to be covered in the review.

Mr Bascand, who is also GM of Financial Stability, says the review is timely given the developments that have taken place since IPSA became law in September 2010.

“The reasons for enacting IPSA have not changed, but what has changed is the experience on which further refinements can be considered,” Mr Bascand said in a speech today to the Insurance Council of New Zealand.

“Since 2010, the Reserve Bank and insurers have gained considerable experience across the legislation, helping us to see what works well and what could be enhanced.

“There has been a high level of activity in relation to transfers of business between insurers, changes of control and insurers entering or exiting the market.”

He says an over-arching consideration for the review of solvency standards will be an assessment of the impact that changes from the introduction of accounting rule IFRS 17, which is set to come into force on January 1 2023.

On the impact of COVID-19, Mr Bascand says there are “many unknowns still to play out” in terms of flow-on impacts.

“The Canterbury earthquake, the COVID-19 pandemic, and historically low interest rates have challenged various parts of the sector in extraordinary ways,” Mr Bascand said.

“We recognise that you are dealing with a busy regulatory environment, so it is important that we progress the IPSA review with a mindset that focuses on improving prudential regulation, not reinventing features of the framework that appear to be working well.

“The starting point is that we have a regime that is not broken, but has been significantly tested in its relatively short lifetime, and lessons can be learned and applied to improvements.”