Geoff Bascand
by Daniel Smith
Geoff Bascand
The Reserve Bank of New Zealand – Te Pūtea Matua commenced the review alongside its review of the Insurance (Prudential Supervision) Act 2010 in October 2020. Insurer solvency standards govern the minimum amount of capital that insurers are required to hold.
Deputy governor and general manager of financial stability Geoff Bascand says that the consultation “has helped us to modify the Insurance Solvency Standards principles to make them more fit for purpose for both the industry, and the Reserve Bank as regulator”.
The principles canvassed included: international comparability, the role of capital in absorbing an insurer’s losses, balance sheet risks and practicality.
The main themes from the submissions were: the imperative for insurers to meet financial obligations to policyholders; balancing the need for consistency of approach across insurers while allowing flexibility where warranted by differences in circumstances, assumptions and methods; and that the Reserve Bank should be explicit about its risk appetite in order to communicate its desired level of conservatism rather than through reference to international peers.
“We have modified the principles to address the feedback and are confident they are now robust and comprehensive.
“The final set of principles are set out in the Principles and Timeline Consultation feedback statement. They will guide the ongoing policy work on the review of solvency standards,” Bascand said.
“As a regulator, the Reserve Bank needs to balance soundness with efficiency and support confidence in the sustainability of the sector. Our approach is risk based and does not intend to provide for a zero-failure regime.
“We acknowledge the current strain on resources in the insurance industry in balancing various regulatory reforms with its Covid-19 response. We have worked to factor these demands into the review implementation timelines,” he added.
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