1 Comment 1 CommentThe Reserve Bank has agreed to develop a set of new capital requirements for variable annuities. It has issued a consultation paper and is seeking feedback from the industry.
Stewart says this is a major step forward. Without getting the central bank, as the prudential regulator, to come up with a set of standards variable annuities would not get off the ground.
"This is a major milestone for us and represents 12 months of working with the Reserve Bank to raise awareness for the importance of Lifetime Income products," he says.
"The Reserve Bank appreciated this, committed resource to evaluating the opportunity and ultimately are now proposing changes to the Life Solvency Standards to recognise variable annuities."
The bank's proposed approach provides for insurers to employ modelling techniques to estimate assets and liabilities and the benefits of risk mitigation measures to be reflected in the capital requirement. While the responsibility for carrying out the modelling lies with the insurer and its appointed actuary, the framework places additional emphasis on an independent actuary.
Stewart says the bank's approach is better than that used in the United States and Europe as it is less prescriptive.
The consultation includes an exposure draft of a new appendix to be added to the Solvency Standard for Life Insurance Business.
In other developments Stewart's company, NZ Income Guarantee, has reached a conditional agreement to buy a licensed life insurance company based in Auckland. He says once this is settled and the required regulatory changes have been made the company will be used as part of the NZIG business.
While NZIG is unlikely to be in the market in October, Stewart hopes to be up and running this year.
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I'd strongly encourage the industry to understand the outlook for kiwisaver, and the service that NZIG can provide