FMG feedback on Mutual Capital Instruments

26 May 2022

Cavan O'Connor-Close Reserve Bank of New Zealand PO Box 2498 Wellington 6140

Emailed to: CapitalReview@rbnz.govt.nz Copy to: InsuranceSolvency@rbnz.govt.nz

Dear Cavan,

FMG feedback on Mutual Capital Instruments

FMG welcomes the opportunity to provide feedback on the RBNZ proposal to develop options for mutual banks to issue capital instruments that qualify as CET1 capital.

FMG is a mutual insurer that operates within New Zealand. We are regulated by the RBNZ under the Insurance Prudential (Supervision) Act and are bound by the Solvency Standard for Non-Life Insurance Business 2014.

While not subject to the banking regulation many of the same issues and capital constraints outlined in this consultation document apply equally to the insurance sector. Mutual insurers are constrained by their inability to access additional capital that is recognised for solvency purposes. Instruments as envisaged in this consultation in conjunction with changes to the capital recognised for solvency purposes would provide an additional source of capital.

It is of note that other jurisdictions, including Australia, have the option of capital instruments that are recognised for solvency reporting purposes for mutual insurers.

We would like to suggest that the RBNZ should consider extending this regime not only to non-bank deposit takers (as suggested in the consultation document) but also to mutual insurers.

Yours sincerely

[Signature]

Margaret Cantwell Chief Actuary

---

FMG Advice & Insurance

Level 1, PwC Centre 10 Waterloo Quay, Wellington 6011 PO Box 521 tel 0800 366 466 fax 0800 366 455 email contact@fmg.co.nz

Call us on 0800 366 466 www.fmg.co.nz