|        About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds

NZ's Financial Adviser News Centre

GR Logo
Last Article Uploaded: Saturday, June 15th, 8:37PM


Latest Headlines

RBNZ's latest paper on insurance causes concerns

Concern has been raised about the far-reaching implications for insurers’ solvency standards of one of the clauses in the Reserve Bank’s latest consultation paper.

Friday, June 14th 2013, 6:58AM

by Susan Edmunds

Submissions are being sought on the Reserve Bank’s solvency standards for insurance companies, relating to third-party guarantees and off-balance sheet exposures. It follows an earlier consultation paper that looked at insurers’ reinsurance arrangements.

If the proposals go ahead, they will increase the minimum solvency capital required for some insurers.

A clause that is causing concern says that insurers must disclose contingent liabilities that are reasonably identified “and give rise to a possibility, even if remote, of a net outflow of resources from the licensed insurer in the next three years”.

Industry sources said there was alarm at the potential breadth of that clause. It could include expenses such as building lease agreements.

The paper is largely clarifying issues around guarantees and exposures,  but makes other changes such as introducing limited use of short-term guarantees in assessing solvency standards. It proposes to limit the amount of reductions allowed on insurers’ Asset Risk Capital Charges due to guarantees.

It says the Bank is aware that some guarantees are being used to gain very large reductions in the charge but that all guarantees could give rise to risk.

“A guarantee will only be effective in mitigating risk if the guarantee is legally binding. The Reserve Bank considers that the provision of some further requirements in the solvency standards as to the requirements for legal certainty would be useful.”

Insurers would also have to hold capital against an amount that represented estimated likely payments to be made as a result of disputes in relation to unpaid claims over the next year.

“This is to recognise the risk that an insurer is likely to have an outflow of resources as a result of claims disputes, even if that outflow cannot be identified as attaching to a particular dispute.”

The paper says that some insurers have had difficulty working out which category off-balance sheet exposures fit into, and what constitutes an off-balance sheet exposure. It says it wants to clarify the rules.

A two-year transition period would be allowed if the changes went ahead.

« Commission regulation unlikely: TateForensic approach to disability claims suggested »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment



Printable version  


Email to a friend
Insurance Briefs

New customers get 3-months' premium-free on Fidelity Life
Fidelity Life has announced a special offer to cover new customers’ premiums for the first 3-months of their policies.

Premium relief for customers in drought areas
Fidelity Life offers premium relief to drought-affected customers

Fidelity Life relaunches customer engagement initiative
Once again Fidelity Life wants to recognise advisers who go above and beyond to deliver amazing customer service.

Asteron Life unveils product enhancements
Asteron Life is proud to announce a series of enhancements and clarifications to multiple covers across Personal and Business Insurance product offerings, reflecting its commitment to understanding and meeting the evolving needs of customers, and making it a more seamless experience for advisers.

News Bites
Latest Comments
Subscribe Now

Cover Notes - Specific news aimed at risk advisers

Previous News
Most Commented On
About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox  |  Disclaimer
Site by Web Developer and