Life insurers well placed if shocks hit their industry and economy

The inaugural stress test for life insurers was reassuring, says Christian Hawkesby, RBNZ’s deputy governor. It was not a pass or fail exercise.

“Participating insurers were able to pay out substantial claims from policy holders and remain solvent during a hypothetical three-year scenario which included long Covid, a new pandemic and a period of severe economic stress,” he says.

The five biggest New Zealand-incorporated life insurers with a market share of 75% of premiums participated - AIA, Asteron Life, Chubb Life, Fidelity Life and Partners Life. The stress test scenario was developed by the RBNZ in consultation with participating insurers.

Previous stress tests have involved banks or general insurance providers, but this was an inaugural stress test for life insurers. Stress tests assess entities’ resilience by demonstrating whether they have enough capital to withstand extreme shocks. They also indicate potential impacts on the broader financial system.