It released its latest Financial Stability Report on Wednesday, which showed that the New Zealand system was broadly sound, although some risks remained.
It considered the insurance sector, including life insurers specifically. The Reserve Bank regulates and supervises all New Zealand insurers.
The report noted that life insurers' profit margins were high relative to international peers, and bancassurers and mature traditional businesses tended to have higher profits than those who distributed through advisers.
Despite that profitability, insurance solvency rates were dropping, the report said.
The Reserve Bank currently requires New Zealand insurers to maintain a solvency ratio above 100%.
All except CBL, which is in liquidation, are meeting that target.
"Solvency ratios have continued to decline for both life and general insurers. Overall, solvency ratios have fallen for larger insurers but held steady or increased for smaller insurers. Some insurers should increase their solvency ratios to improve their resilience to financial shocks," the Reserve Bank said.
It suggested that insurers could be required to hold more capital in future.
"The prudential framework for regulating and supervising insurers is set out by the Insurance (Prudential Supervision) Act, and supplementary regulations. The Reserve Bank is set to recommence a review of IPSA, including the capital/solvency standards and risk management policies.
"Solvency standards influence the ability of insurers to absorb unexpected losses. The Reserve Bank intends to consider whether additional solvency buffer requirements are justified. Solvency buffer requirements are applied to insurers in other jurisdictions and analogous requirements are applied to banks in New Zealand."
The report pointed to the recent conduct report on the life insurance sector, which was completed in conjunction with the Financial Markets Authority. The bank said it showed the sector in a poor light.
"It found that all life insurers need to make substantial improvements to how they identify, manage, remediate and report on conduct risks and issues, in order to deliver better customer outcomes," the report said.
"The review asked insurers to review their commission structures. The level of commission payments made to intermediaries/agents for New Zealand life insurance contracts is very high compared to international norms, although it varies across different products.”
It said, in the year to September 2018, disability income individual policy commissions were about 25% of the gross premium revenue for the product. For credit life insurance, commissions were just over 25% of premiums, and lump sum individual policies' commissions were 20%.
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