The Reserve Bank of New Zealand (RBNZ) will review the Insurance Prudential Supervision Act this year – the first review since its inception five years ago.

It seeks to ensure the Act provides for a cost effective risk-based supervisory regime and instils public confidence in the insurance sector.

The central bank, which handles prudential regulation of insurers – believes the review will also reveal opportunities to cut administrative costs.

For example, it may reduce the fragmentation of policies across regulatory instruments or allow for greater use of generally applied requirements instead of individually applied ones.

The review will also examine whether requirements for overseas insurers adequately balance recognising home-country regulation and protecting New Zealand policyholders.

The RBNZ believes the Act has so far had “a positive effect on the soundness of the industry” and “has worked well in most areas”.

The central bank will start a public consultation with the release of an issues paper in the fourth quarter of this year, inviting stakeholders to comment or suggest other issues to consider.

It will then engage the industry next year, before issuing an options paper.

Any legislative change will be in 2018 at the earliest.

Stakeholders can comment or provide feedback on the operation of the Act any time outside the formal consultation via ipsareview@rbnz.govt.nz.