New Zealand insurers’ risk governance is reasonably good and most are working to further improve it, according to the Reserve Bank of New Zealand.

A small minority of the 17 insurers studied have risk governance weaknesses and need to review their frameworks, the regulator says, without naming the companies.

It says insurers could focus on the behavioural aspects of governance, particularly communication and incentives to encourage staff to meet risk objectives.

Boards sometimes struggle with the volume and complexity of material they must consider, even when there is a risk subcommittee.

Stronger risk frameworks draw information from throughout the company, from sources embedded within business units, and have independent review of the organisation.

“A general area of weakness is the implementation of robust risk appetite frameworks.”

The regulator says subsidiaries using group risk management programs should adapt these to New Zealand conditions and local boards should assert their independence to make sure this happens.

The bank wants insurers to regularly review their risk management frameworks, and boards and senior managers to set the “tone from the top”, leading by example on strong governance.

Although the general quality of directors is encouraging, “we think boards lack diversity, particularly in terms of the mix of skills”.

Insurers often comment on the relatively small pool of directors in New Zealand. The bank says boards are strong in legal, general finance and insurance expertise, and weaker in risk management skills.

The regulator gave scores out of 10 to CEOs and risk chairmen. The average for the 17 CEOs is 6.9, although one rated 10. The average for risk chairmen is 7.6.