The Reserve Bank of New Zealand (RBNZ) will be relaunching its review of the Insurance (Prudential Supervision) Act (IPSA) in October.
According to a statement by RBNZ, the review was initiated through an industry consultation in 2017, and was set to resume in March this year, but was delayed due to the COVID-19 pandemic.
The original IPSA was enacted in September 2010 to bring New Zealand up-to-date with international standards for prudential regulation, the central bank said. The reasons for enacting IPSA have not changed, and it is good regulatory practice to review legislation to ensure it is working effectively and update it for the lessons learned over the past 10 years, said RBNZ deputy governor and general manager of financial stability Geoff Bascand.
The first Canterbury earthquake occurred just a few days before the enactment of IPSA, which led to intense supervisory activity and application of IPSA provisions over the next decade.
RBNZ identified several recent experiences that will help inform the IPSA review, including an International Monetary Fund assessment in 2017 and the independent review of Reserve Bank Supervision of CBL in 2019. The joint Reserve Bank/Financial Markets Authority review into insurer conduct and culture, as well as and the thematic review of the Appointed Actuary regime will also provide further background and context.
The Reserve Bank believes that associated solvency standards need to be updated for impending changes to accounting standards, and the review will consider adopting a mandatory buffer above the minimum solvency level.
A policy paper outlining the resumption of the IPSA Review, as well as objectives and topics to be covered, will be published in early October. At the same time, RBNZ will also release a consultation paper on principles to guide the review of solvency standards.
“We’ll be staying in regular communication with our industry stakeholders as this work progresses -their feedback is crucial to helping us shape the regime in an efficient and effective matter,” Bascand said.