The Insurance (Prudential Supervision) Amendment Act 2013 (IPSA Act) was enacted just before the transition period for the full licensing of insurers expired on 7 September. The Act follows on from a review carried out by the Reserve Bank of New Zealand (RBNZ) on the operation of the Insurance (Prudential Supervision) Act 2010 during the transitional period, to ensure that the 2010 Act was effective and did not impose unnecessary compliance costs on insurers.
The IPSA Act makes the following key amendments to the 2010 Act.
- Reduced compliance costs for overseas insurers: The Act now allows for overseas insurers to be permitted, on the approval of RBNZ, to prepare interim financial information in accordance with requirements that apply in the insurer's home jurisdiction.
- Other unnecessary compliance costs removed: This includes allowing RBNZ to accept an insurer that is running off its liabilities from the requirement to have a current financial strength rating. The IPSA Act also clarifies that in respect of contracts of insurance that renew more frequently than annually, disclosure in writing on the insurer's financial strength rating to the policy holder may be made on at least an annual basis rather than at every renewal.
- Financial reporting provisions aligned with the Financial Reporting Bill: In keeping with the Financial Reporting Bill, which is currently before Parliament, the requirement to report interim financial information to RBNZ has been extended from three months to four months.
- Official register of licensed insurers: RBNZ has been empowered to publish and maintain on its website an official register of licensed insurers, with additional content to be determined by regulations. A consequential amendment was made to the Reserve Bank of New Zealand Act 1989 by the Reserve Bank of New Zealand Amendment Act 2013 to provide for common standards to apply to this register and the register of registered banks.
- Provisional licence for insurers extended for some situations: Although the majority of insurers were fully licensed prior to the end of the transitional period, the Act has been amended to allow for a provisional licence to remain in force at the discretion of RBNZ if particular circumstances apply to an insurer. This change allows RBNZ to continue to have oversight of the insurers that were unable to convert their provisional licences to long-term licenses until RBNZ is satisfied that the provisional licence should be cancelled.