Governor Adrian Orr spoke at the Insurance Council conference in Auckland on Tuesday.
He said there were changes ahead for the sector.
“The themes and issues that were identified in our 2017 discussion paper will be considered further in 2020,” he said.
“We expect to give initial priority to the scope of the Act, in terms of how we adequately cater for innovation, different business models, and new entrants competing with established insurers. We will consider whether we need to make changes to the legislation that better ensures appropriate competition between overseas branches and locally incorporated insurers. And we will look to enhance the enforcement tools available to the Reserve Bank, to better align with our supervisory approach.
“Additionally, the International Financial Reporting Standard, IFRS 17, is scheduled to take effect in 2022 for most insurers. While it sounds minor and detailed, this is a once-in-a-generation set of changes to the way insurance contracts are accounted for, and reported to the market.”
He said those standards also affected the rules set by the Reserve Bank for insurer solvency.
"We thus need to review our solvency standards to ensure they are effective and in line with lessons from other jurisdictions, such as Australia.
"It is too early to say whether or not our review of insurer solvency will lead to the kind of uplift we have proposed for bank capital. However, we do expect that the current ‘black line’ of a single regulatory minimum limit for solvency will be replaced with a more graduated series of thresholds – and varied regulatory response options – as we have proposed for banks."
He said the task of regulating insurers was not straightforward.
"The nature of insurance contracts can vary greatly between insurers or insured events, and are often dependent on the individual circumstances of the policyholder.
"Furthermore, there are significant information-asymmetries between an insurance provider and their customer, and the risks of providing poor or outdated information run in both directions. ‘Who is good for what, and when?’.
"For example, often there is a long period of time after a customer-relationship has been established. In very difficult circumstances, a customer may find that they do not have the coverage they believed would be available to them. And, on the other side of the ledger, insurers rely on accurate information from customers about their own circumstances."
He said customer expectations also changed regularly.
"There is a heightened awareness across the financial sector as a whole of the importance of good business conduct.
"The public is demanding that both insurers and regulators play their part in providing greater confidence in the insurance sector. The Reserve Bank will prioritise insurance policy and supervision reviews in 2020 and beyond, and enable individuals and firms to actively participate in shaping the industry’s future."
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