RBNZ 'doing its job'

There is industry acceptance of Reserve Bank Governor Adrian Orr raising concerns about life insurer insolvency.

Friday, June 5th 2020, 9:49PM 1 Comment

Richard Klipin

In its latest Financial Stability Report, the Reserve Bank warned there were challenges ahead for insurers as low interest rates, minimum growth in premiums and higher rates of cancellation combined.

The RBNZ warned that some life insurers were operating with low solvency levels and buffers. It had conducted preliminary stress testing of insurers' exposure to a range of channels through which Covid-19 could affect them.

“We are continuing to work with insurers to see them build better resilience and maintain a strong focus on long-term customer outcomes.”

Naomi Ballantyne, managing director of Partners Life, said it was a general statement for an industry in which each company would have its own individual set of circumstances.

Some were offshore and had to compete for capital with requirements from around the world, and others were New Zealand-owned with differing degrees of access to capital, she said.

“The calculation is complex and sweeping statements are not helpful … particularly since we have a few life insurers and each one is different. But on balance it was okay.”

She said insurers were all working through their stress tests and checking their performance against modelling.

She said she was hopeful that the offer of a premium holiday would reduce the number of lapses that would occur.

Financial Services Council chief executive Richard Klipin said the Reserve Bank was doing its job as prudential supervisor of the sector.

He said it was an important role for the industry’s system and stability. While the industry might not completely agree with its views and assertions, it was important that the Reserve Bank was able to effectively carry out its role as supervisor, he said.

Tags: Adrian Orr FSC insurance Naomi Ballantyne RBNZ Reserve Bank Richard Klipin

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Comments from our readers

On 14 June 2020 at 11:14 am Hal9000 said:

One of the core roles of the Reserve Bank as Prudential Regulator under IPSA (see IPSA, para 3) is to promote public confidence in the insurance sector. One does question where this fits in with some of the sweeping statements the RBNZ are making that are then picked up by media. A couple of insurers have some solvency issues? Absolutely a deep concern - but one questions whether it is appropriate and in line with remit of said regulator whether they should tar the whole industry with the same dark brush and make such public announcements calling into question the whole industry. Is this really logically compatible with promoting public confidence in insurance?

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