Reserve Bank legal powers tested
Reserve Bank staff had to use their new legal powers to request information from insurers during the insurance licensing process, it has been revealed.
Monday, March 24th 2014, 6:00AM
by Susan Edmunds
All of the country’s insurers had to be fully licensed by September 9 last year. There were 96 full licenses issued under the Insurance Prudential Supervision Act (IPSA), which came into effect in 2010.
The Act contains a range of requirements for insurers, including solvency and “fit and proper” standards, disclosure and reporting rules.
Peter Brady, Reserve Bank manager of insurance oversight, said in a speech last month that the Reserve Bank was still refining its work on supervising licensed insurers.
He said that it was expected that any potential breaches of IPSA would be revealed to the Reserve Bank immediately, with adequate information for it to determine how serious the issue was, and what the insurer was doing about it.
“We expect our requests for information to be dealt with promptly. In situations where the information we require is not forthcoming or we need independent input, we would use the powers in IPSA to obtain information or conduct investigations.”
But he said that would not be a new experience – the powers had been deployed during the licensing process. “We are well practised in using these powers, as a number of them had to be exercised during licensing.”
IPSA allows the Reserve Bank to request any information, data or forecasts about any matter relating to the business, operation or management of any insurer – and the companies can be fined up to $500,000 if they do not comply. It can also enter and search a business if it thinks there are reasonable grounds to believe a licensed insurer is not complying with its requirements.
The Reserve Bank would not say which insurers had had to be the target of the IPSA powers during licensing – saying it would not comment on individual businesses.
But a spokesman said some insurers had taken a more formal, legalised approach to their interaction with the bank and it had needed to respond in kind.
“We had 120-odd [insurers] initially so there was a wide range of different approaches taken. Some of them came tooled up, some were dressed in jandals, and everything in between.”
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