The Reserve Bank of New Zealand will relaunch its review of the Insurance (Prudential Supervision) Act in October. The review began in 2017, was due to resume in March, but was delayed because of Covid-19.
The bank’s Deputy Governor and General Manager of Financial Stability Geoff Bascand made the announcement during a speech to the Insurance Council in Wellington on Monday 14 September. He said a policy paper outlining the resumption of the review will be published in early October.
“At the same time, we will also release a consultation paper on principles to guide the review of solvency standards,” said Bascand.
New Zealand insurers need to maintain a solvency ratio above 100%. However, the Reserve Bank concedes that low solvency does not necessarily indicate a weak insurer, or a high solvency position a strong insurer.
Bascand told the Insurance Council: “A key difference between the life insurance sector and the non-life sector appears to be that the extent of insurance take-up, or insurance penetration, for life insurance is low by comparison with other OECD countries.
“Another key feature of New Zealand’s life insurance sector is the prevalence of relatively high upfront commission rates compared with overseas counterparts, whilst profitability appears to be at least as good as overseas experience.”
A report last week, produced for Partners Life by Deloitte, explored the issue of the apparent low take-up of life insurance in New Zealand and concluded that State support fills the perceived gaps the RBNZ has previously highlighted.
See our story: Risks Involved In Moving Away From Commission System.