The Reserve Bank of New Zealand (RBNZ) has initiated a consultation on an interim solvency standard for insurers, as the country’s central bank gathers public opinions in its process of determining the minimum amounts of capital that insurers must hold.

The consultation period is open until October 01, with the form accessible on RBNZ’s website.

According to RBNZ deputy governor and general manager of financial stability, Geoff Bascand, the interim standard is needed in order to take account of upcoming changes to the accounting rules (IFRS 17) and to incorporate feedback on New Zealand’s current solvency standards. The standards are designed so that policyholders can be confident that an insurance company has enough funds to meet its promises to policyholders, even if it fails.

“Through our review of the standard we have modified some of the ways that we require insurers to calculate their capital needs,” Bascand said. “This is to ensure greater consistency and clarity in our requirements, and to deal with new accounting standards for the insurance industry.”

“This will bring our method for capturing risks into line with international standards. We will undertake further analysis, in consultation with the industry, as we are keen to understand the capital impact on insurers. We strongly encourage them to engage with the consultation.”

According to RBNZ, the proposed interim solvency standard is part of a multi-year review of the Insurance Prudential Supervision Act (IPSA) 2010 and its associated Insurer Solvency Standards. The standard will take effect beginning early 2022 for a period around three years. Its contents will be a synthesis of RBNZ’s insights from supervising the insurance industry and its consultation with industry representatives and the general public.