Take ratings with grain of salt: Neilson

The Insurance Prudential Supervision Act requires the companies to have and display a rating from an approved ratings firm such as Standard and Poors or AM  Best.

Previously, insurers would often only have been given a rating when they wanted to raise capital or were publicly listed.

Financial Services Council chief executive Peter Neilson said New Zealand life insurance firms tended to be quite conservative by nature. He said life insurance had a long gestation period so it was only serious errors in calculation that could land a company in major problems.

He said the ratings requirement was unlikely to have a big impact on companies, although it could create pressure on businesses that went through an unprofitable period. Now, they may need to raise capital to maintain their rankings. Previously that would have been unnecessary.