Compulsory onsite inspections: scope of Reserve Bank’s power remains unclear

The proposal is part of the bank’s review of the Insurance (Prudential Supervision) Act 2010. It has a consultation paper in the market on penalties and enforcement and is seeking feedback. But there are concerns that some of the detail and proposed safeguards are too sketchy and, in some cases, raise more questions than they answer.

Cabinet has already agreed that the bank should be given the power to do the inspections: the issue up for debate is what that power should look like.

Compulsory onsite inspections are a major departure from the present light-handed approach where inspections can be done only with the consent of a licensed insurer. The bank has no power to required information from unlicensed entities that might be operating as insurers.

Sam Hiebendaal, a senior associate at law firm Bell Gully, says the most important issue with compulsory onsite inspections is to define the legal scope of the power.

A crucial question is whether it will enable the regulator to question employees and directors under oath – an issue which remains unclear.