The Reserve Bank of New Zealand (RBNZ) has released a full set of legislative proposals, which include introducing a breach reporting regime and a wider range of enforcement tools, as it looks to become a more proactive insurance regulator. 

RBNZ has released an “omnibus” consultation paper on planned Insurance Prudential Supervision Act 2010 (IPSA) amendments, after starting a review in 2017 and since releasing groups of proposals for feedback. 

“The proposed changes will support the Reserve Bank’s evolution from light touch supervision towards a more proactive and intensive approach that is more closely aligned with international best-practice,” Deputy Governor Christian Hawkesby said. 

“We will be able to set out clearer and more enforceable rules in areas such as governance and risk management, making us better equipped to address emerging issues such as cyber security and climate.” 

RBNZ would have wider information gathering powers and the ability to conduct on-site inspections without notice under the proposals, but without the search powers available with a warrant. 

A breach reporting regime would introduce “an explicit requirement” for insurers to monitor compliance and to notify the RBNZ where an insurer believes there may be a “material” issue. 

“Stakeholders were concerned to ensure that materiality was clearly defined, and defined in a way that would keep the process manageable,” the consultation paper says. “We agree with this feedback and would develop and publish guidance if any amended legislation is enacted.” 

A power would be introduced to require insurers to publish RBNZ written warnings, and infringement notices would enable modest fines for relatively minor or unambiguous breaches, such as around failing to provide information. 

Criminal maximum penalties would sit between levels in the Financial Market Infrastructures Act and the Deposit Takers Act, under changes that would boost fines from current levels, while also introducing civil penalties. 

Other changes include expanding the suite of executives covered by the “fit and proper” rules to include the chief risk officer, and requiring licensed insurers to seek RBNZ approval of relevant officers before appointments are made, in a shift from post-appointment notification. 

RBNZ proposes to adjust the definition of “carrying on business” in New Zealand, to bring firms based in the country but with no local policyholders into the regime.

“We propose requiring a license in these cases to avoid reputational risk to New Zealand and to comply with international norms on the cross-border regulation of insurance,” the paper says.  

Overseas entities that only provide reinsurance would not need to be licenced in New Zealand, under proposed changes. 

Submissions will be accepted until December 12. Following the consultation, RBNZ intends to finalise its policy preferences and seek Cabinet approval to draft an Amendment Bill.