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Insurance Enforcement And Distress Management Framework Refined By Public Consultation

The Reserve Bank has reviewed feedback received on its Enforcement and Distress Management consultation for insurers which will help to ensure the final policy is proportionate to the risks faced.

The Reserve Bank of New Zealand – Te Pūtea Matua is responsible for the prudential supervision of insurers. We promote ‘sound’ insurers – businesses that are well run and are in a solid financial position – so they can pay out when their policyholders make claims.

The consultation was the third that we have conducted as part of our comprehensive review of the Insurance (Prudential Supervision) Act 2010 (IPSA). The feedback statement we are publishing today was informed by submissions from industry associations, individual insurers and a public webinar. We thank all those that took the time to submit their views, Deputy Governor and General Manager for Financial Stability Christian Hawkesby says.

The consultation explored the enforcement powers and penalties we can use to respond to compliance issues; the Reserve Bank’s supervisory powers under IPSA; our role in distress management; and how powers will be unlocked as insurers’ capital declines (‘ladder of intervention’).

There was strong support for the general principle that the Reserve Bank should have a more graduated and proportional set of penalties and enforcement tools and support for many of the regulatory tools proposed.

Feedback highlighted that it is important for the Reserve Bank to provide clear policy guidance about how these tools can be used, and noted the importance of proper safeguards being in place for the use our supervisory powers.

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We expect to release the fourth consultation Governance, Supervisory Processes and Disclosure in October 2022.

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