Input from insurers on solvency standards

The New Zealand insurance industry is being asked to have its say on a proposed interim Solvency Standard for insurers, which will determine the minimum amounts of capital insurers must hold.

Monday, July 26th 2021, 10:28AM

by Matthew Martin

The Reserve Bank of New Zealand (RBNZ) is asking for feedback saying the interim standard is needed to take account of upcoming changes to accounting rules (IFRS 17) and to incorporate feedback into its current solvency standards.

The Interim Solvency Standard consultation will be open for 10 weeks until October 1, 2021, will take effect from early 2022 and be in force for around three years.

The standard has been designed so policyholders can be comfortable that an insurance company has enough funds to meet its promises to policyholders, even if it fails, RBNZ deputy governor and financial stability general manager Geoff Bascand says.

“Through our review of the standard, we have modified some of the ways that we require insurers to calculate their capital needs. This is to ensure greater consistency and clarity in our requirements and to deal with new accounting standards for the insurance industry,” Bascand says.

“This will bring our method for capturing risks into line with international standards. We will undertake further analysis, in consultation with the industry, as we are keen to understand the capital impact on insurers. We strongly encourage them to engage with the consultation.”

The interim solvency standard is part of a multi-year review of the Insurance Prudential Supervision Act (IPSA) 2010 and its associated Insurer Solvency Standards.

Its contents have been informed by the bank's supervision of the insurance industry and consultation with industry representatives and the general public.

“The consultations provided us with insightful feedback and we thank all of those who took the time to provide their thoughts and ideas,” Bascand says.

The interim solvency standard consultation has been released alongside feedback received from consultations on the structure of the Solvency Standards and IFRS 17 (the new accounting standard for insurance contracts), and on the Scope of the Insurance (Prudential Supervision) Act 2010 and treatment of overseas insurers - together with responses to public submissions received.

Click here for details.

Tags: consultation insurer solvency insurers RBNZ