The Reserve Bank of New Zealand has issued the final draft of the statutory fund regulations for life insurers.

The Insurance (Prudential Supervision) Amendment Regulations cover the establishment of statutory funds, restrictions on unsecured borrowing and how profits and losses from the fund are distributed.

Financial Services Council of New Zealand (FSCNZ) Executive Officer Deborah Keating says life insurers are required to keep their life business in a separate fund, but there is no requirement to keep a statutory fund.

“The requirement to establish such funds is an additional cost for those companies that do not already have a statutory fund and need to move funds into a new statutory fund,” she told insuranceNEWS.com.au.

“But it should not be a major issue for anyone.”

Ms Keating says the new requirement will primarily affect companies that are providers of KiwiSaver schemes, as they will have to establish a separate life business statutory fund.

“We are also proposing the option that a small additional contribution could be built in to cover life, disablement and trauma cover and also a capital guarantee for contributions,” she said.

The New Zealand life insurance industry had objected to the requirement that two directors were to sign off the solvency returns, saying it was “unduly onerous”.

“The bank has some sympathy for these views,” the Reserve Bank said in a statement accompanying the new regulations.

“Our strong preference is to get insurers’ boards involved in solvency monitoring at an early stage, but if an insurer believes this is not practical for the return, we (the bank) is prepared to accept the ‘sign-off’ form the CEO instead.”

The bank is looking for the first return to cover the period for the six months ending December 31.

The draft regulations are open for consultation until June 22.