Bringing Financial Stability Legislation to the Insurance Industry-The Insurance (Prudential Supervision) Act 2010

By Dean, Richard | The Reserve Bank of New Zealand Bulletin, December 2010 | Go to article overview

Bringing Financial Stability Legislation to the Insurance Industry-The Insurance (Prudential Supervision) Act 2010


Dean, Richard, The Reserve Bank of New Zealand Bulletin


1 Introduction

Insurance is an important (but not systemic) component of the financial services sector in New Zealand. The protection provided by insurance is a significant element in the financial security of individuals and companies in New Zealand, as is the case worldwide, and the lack of insurance through the failure of an insurer could have significant impact on those who are directly or indirectly affected. Whilst the failure of an individual insurer may not have the same systemic importance in New Zealand as the failure of one of New Zealand's major banks, independent failures within the insurance industry would certainly have a degree of impact on the economy's security. Accordingly, it is important that the New Zealand insurance industry is financially stable and soundly regulated, and, equally importantly, is seen to be so by external observers.

For many years, the New Zealand insurance industry has carried something of a "wild west" reputation, at least as viewed from overseas. The country had one of the least regulated insurance markets in the world and, despite a reasonably effective self-regulatory approach taken by insurers, New Zealand remained firmly out of line with established international expectations of insurance regulation. (2) All our relevant trading partners have well-established and strong regulatory models covering the activities of insurers; for example the Australian Prudential Regulation Authority (APRA) regulates insurance in Australia, the Financial Services Authority (FSA) in the UK, the Office of the Superintendent of Financial Institutions (OSFI) in Canada, the Monetary Authority of Singapore (MAS) in Singapore, and there are many state regulatory models in place across the US.

Government acknowledged this regulatory shortfall early in the decade and, in 2003 and 2004, the New Zealand Law Commission produced reports on life insurance, including recommendations regarding an overhaul of existing outdated legislation and the establishment of a prudential regulator for the New Zealand insurance sector; ie, a watchdog over the financial stability of insurers carrying on insurance business in New Zealand.

Following this report, and as part of its ongoing "Review of Regulatory Frameworks", the government announced a review of the Regulation of Non-Bank Financial Products and Providers (RFPP) in 2005, with the intention of ultimately developing an effective and consistent regulatory framework and promoting confidence and participation in sound and efficient financial markets. This review included the insurance sector. Arising from the RFPP was the government decision to appoint the Reserve Bank as the prudential regulator and supervisor for insurers.

2 Designing a new regulatory regime

A strong Reserve Bank understanding of the New Zealand insurance industry was a critical factor in the successful design of an effective and appropriate regulatory model for insurers carrying on insurance business in New Zealand. New Zealand's population of just over 4 million people is served by a diverse insurance industry that currently comprises approximately 160 registered entities that have paid their statutory deposits as required by the Insurance Companies Deposits Act 1953. (3)

Insurers are split approximately 75 percent non-life (including medical insurers) and 25 percent life insurers. There are a large number of small companies and a smaller number of large companies--at least large by New Zealand standards. (By worldwide standards all insurers operating in New Zealand are small, and the total New Zealand insurance market is tiny when viewed in a worldwide context). There are a large number of companies that are sourced offshore, some of which exist in New Zealand as locally incorporated subsidiaries and some as branches of overseas insurers. There are also a number of indigenous insurers. There are reinsurers and captive insurers. In summary, the market is small, comparatively well developed, diverse--and (until now) virtually unregulated from a prudential perspective. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Bringing Financial Stability Legislation to the Insurance Industry-The Insurance (Prudential Supervision) Act 2010
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.