Insurers are “strongly encouraged” to engage with the Reserve Bank of New Zealand (RBNZ) as it invites views on an interim Solvency Standard designed to determine minimum amounts of capital cover providers must hold.

The interim standard, which takes account of upcoming changes to IFRS 17 accounting rules, will take effect from early 2022 and be in-force for around three years.

RBNZ will host a webinar to discuss the draft interim standard on August 5 and consultation is open for 10 weeks until October 1.

RBNZ, which also published a feedback statement from earlier consultation run over summer, says the draft does not incorporate a re-calibration of capital charges as that is the primary task for stage two of the Review in 2022-2023.

It is not primarily designed to alter capital requirements but will have “some implications for capital”.

“We will be carrying out a Quantitative Impact Assessment in conjunction with this consultation in order to understand any unexpected or undesirable effects, establish a format for the solvency return going forward and inform the calibration of risk charges as part of stage two of the review,” it said.

Deputy Governor and GM Financial Stability Geoff Bascand says the changes bring the method for capturing risks into line with international standards and further analysis will be undertaken in consultation with industry to understand the impact on insurers.

“We have modified some of the ways that we require insurers to calculate their capital needs. This is to ensure greater consistency and clarity in our requirements, and to deal with new accounting standards for the insurance industry,” Mr Bascand says.

The interim standard is part of a multi-year review of the Insurance Prudential Supervision Act (IPSA) 2010 and its associated Insurer Solvency Standards.