The Reserve Bank of New Zealand (RBNZ) has acknowledged being overly lenient in its handling of failed insurer CBL and admits it should have acted more urgently in addressing concerns.

It follows criticism of the country’s financial services regulator in an independent review.

“We accept all findings and recommendations for ourselves and the insurance regulatory regime,” Deputy Governor Geoff Bascand said. “The recommendations will serve to strengthen the overall regime and, longer term, contribute to more effective prudential supervision by the bank.”

CBL Insurance was placed into interim liquidation by the New Zealand High Court in February last year on an application from the RBNZ, and entered full liquidation in November.

But the regulator had misgivings about reserving and solvency issues as early as 2014.

“The bank gave CBL the benefit of the doubt, whereas, in our view, the bank should have persevered as strenuously as possible to resolve its doubts,” the report by former Australian Prudential Regulation Authority member John Trowbridge and QC Mary Scholtens says.

The report recommends the RBNZ make full use of its powers when in doubt about a company’s financial soundness, and says it should strengthen insurers’ obligations through greater scrutiny and accountability of boards, management and appointed actuaries.

Increased resources for the supervisory and policy team are proposed. And the report recommends modifying the solvency standard and, if necessary, seeking to modify the Insurance (Prudential Supervision) Act 2010 to strengthen the capital management and solvency framework for insurers.

Insurance Council of New Zealand CEO Tim Grafton says the report will feed into other reviews and reform processes that affect the RBNZ’s regulation of insurers.

“There are changes ahead, I have no doubt, and they are clearly looking at what happened in this case to support some of the changes they are wanting to make in the future,” he told insuranceNEWS.com.au.

Peter Harris, the former MD of CBL parent company CBL Corporation, has criticised the report, commissioned by the RBNZ, and says some criticisms of the company are based on “undefended and unproven allegations” that it rejects.

See ANALYSIS.