The Reserve Bank of New Zealand is seeking feedback on its insurance policyholder security consultation, which discusses whether policyholders are being given adequate protection under the current legislation.
The consultation is part of a wider review of the Insurance (Prudential Supervision) Act (IPSA) 2010, which has been ongoing since 2016. The current consultation looks at sections of the Act focused on policyholder security, and is set on reducing the risk of insurers not being in a financial position to make the claims payments that they owe to policyholders.
Commenting on the review, Reserve Bank adviser - financial policy and analysis Ben Thirkell-White said that it is very much in the ‘options’ stage and no firm decisions have been made, so feedback from the industry is being actively encouraged.
“We’ve put out a consultation paper for each section of the Act with some fairly open questions,” Thirkell-White said.
“This isn’t the kind of consultation where we’ve already decided what we want to do and are asking the industry to comment - it’s more that we have a range of options that we think are worth considering, and, for most of them, we haven’t yet gotten a firm internal view of what we want.”
“So, feedback is particularly welcome, and we will be listening to comments on which of the options look like a good idea or a bad idea, and reasons are particularly helpful for us,” he said.
“If you can see problems with some of the things we’re proposing, then any reasons you give around that are very helpful.
“If there are things that we haven’t thought of to address the issues or problems that we raise, then those are also extremely welcome. So, it is an open consultation, and we’d really like the insurance sector’s engagement.”
The consultation reviews the amount of capital that insurers are required to hold as a buffer - or their ‘solvency capital’ - and also discusses whether insurers should be giving policyholders more information on their rights if their policies are terminated early. It is also offering the public the chance to comment on whether the current legislation gives them the level of security that they expect.
The IFSA review will include five consultations in total, and Thirkell-White said the full review should conclude sometime in 2022.
“This is the second of a planned five consultations,” Thirkell-White explained.
“The first was around the scope of IPSA and the treatment of overseas insurers, which we put out at the end of last year. This one is on policyholder security, and we’re working on enforcement and distress management at the moment, and we’re hoping to put that out either at the end of this year or the beginning of the next.”
“There will also be one on key officers and control functions - things like governance and directors duties - and then an additional one on supervisory processes, disclosure, regulatory mechanisms, and anything else that has come up in the course of the review,” he added.
“We’re hoping that the review will be finished by 2022, and then 2023 will be time to put out news of what we actually plan to do in a much firmer way and actually start the legislative process.”
The consultation window on policyholder security has been extended to November 15, 2021, and submissions can be made through the Reserve Bank’s online consultation form.