The Reserve Bank of New Zealand (RBNZ) has announced a new two-tier regulatory system that aims for closer oversight of insurers.

In May licensed insurers were divided into two groups: designated insurers, which require a greater level of oversight; and portfolio-managed insurers.

“Licensed insurers requiring a greater intensity of supervision will have a designated supervisor,” the RBNZ says in its latest industry update. “Supervision of these insurers is designed to enable early identification and resolution of prudential issues.”

RBNZ supervisors will develop an understanding of designated insurers’ business models, strategies, governance and risks.

An annual prudential meeting with the regulator is required after year-end returns, plus “regular and structured engagement”.

Portfolio-managed insurers will be monitored by a specialist team of supervisors.

“Prudential oversight is oriented towards ensuring requirements are met and supervisory measures are resolved promptly,” the RBNZ says.

Regular bank newsletters, industry engagement and workshops will be part of the process.

The regulator says the new system started on June 2. It follows the introduction of the Insurance (Prudential Supervision) Act in 2010 and licensing of insurers.