by Paul McBeth
The committee's report says small insurers, which would probably be defined as posting annual gross premium income of between $1 million and $1.5 million should be excluded from some requirements of the pending regime for the sector. These firms would not need to meet financial strength ratings, statutory funds requirements, some requirements relating to financial reporting, and minimum capital requirements.
They would, however, need to obtain a licence from the Reserve Bank, meet fit and proper staff standards, adhere to risk management requirements, and appoint an actuary. The committee report also recommends the legislation be amended to allow "sufficient flexibility" to apply special conditions on matters such as solvency.
"We are recommending the establishment of a graduated regime for small insurers because such entities could find a number of requirements in the full regime particularly onerous, to the point that it might put their viability at serious risk; and because no real benefit would be gained from applying the entire regime to small insurers," the report said.
The committee also wants to grant the Reserve Bank, which will oversee insurers, the ability to grant exemptions to persons entering into one-off insurance contracts that are secondary to their business.
Though the MPs knocked back bids to grant exemptions to certain types of insurers, such as captive insurers and incorporated societies, saying the bill intends to capture all kinds of insurers, they recommended voluntary professional and trade organisations providing some insurance-type services to their members be excluded.
The Reserve Bank will make itself available to offer advice to firms on how to comply with the new regime during a three-year transition period, the report said.
Paul is a staff writer for Good Returns based in Wellington.
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