Solvency Standard for New Zealand Local Government Insurance Corporation Limited 2014

Ref #5856424 v1.11 Solvency Standard for New Zealand Local Government Insurance Corporation Limited 2014 Prudential Supervision Department Issued: December 2014 REVOKED

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1. Introduction 1.1. Authority
2. This solvency standard is made under section 55 of the Insurance (Prudential Supervision) Act 2010 (the Act). 1.2. Previous Versions
3. A previous version of this solvency standard was issued in August 2013. This solvency standard was last consulted on in 2014. 1.3. Commencement
4. This solvency standard comes into force on 1 January 2015. 1.4. Application
5. This solvency standard applies only to the New Zealand Local Government Insurance Corporation Limited (Civic Assurance) and only if Civic Assurance is required by a condition of licence to maintain a Solvency Margin in accordance with this solvency standard. 1.5. Requirements
6. This solvency standard incorporates the Solvency Standard for Non-life Insurance Business 2014 and all subsequent amendments to that solvency standard.
7. Civic Assurance must comply with the Solvency Standard for Non-life Insurance Business 2014, subject to the following modifications.
8. Paragraphs 1 to 8 of the Solvency Standard for Non-life Insurance Business are replaced with paragraphs 1 to 4 of this solvency standard.
9. In paragraph 21, the following definition is inserted after the definition of Solvency Unexpired Risk: Specific LAPP Policy comprises the following two documents: the specific policy titled “LAPP Insurance Policy from Civic Assurance” dated 30 June 2010 and a supplementary document titled “LAPP Insurance Policy from Civic Dated 30 June 2010” dated 20 September 2012. Note that the New Zealand Local Government Insurance Corporation Limited is trading as Civic Assurance and LAPP is the New Zealand Local Authority Protection Programme Disaster Fund. REVOKED

3 9. In Section 3.1, Table 1 – Insurance Risk Capital Factors (which follows paragraph 35) is replaced with the following table: Class of Insurance Business Underwriting Risk Capital Factor Run-off Risk Capital Factor Domestic property 14% 36% Private motor 14% 36% Commercial property 16% 44% Commercial motor 14% 36% Liability classes 22% 60% Marine 16% 44% Health and Personal Accident 16% 44% Travel 14% 36% Other 16% 44%

10. In the definition of Premium Liabilities, paragraphs 30(a), 37, 39, 40, 86(c), 92(a), and 117 (b) (iv) the value “75%” (being the required risk margin for: the probability of sufficiency is replaced with “90%” in every case.
11. Paragraph 91 is deleted.
12. After paragraph 92, the following paragraphs are inserted: 92A.For reinsurance recoverable assets clearly identified to the Specific LAPP Policy (refer to the definition of that term in paragraph 21), the Reinsurance Recovery Risk Capital Charge is calculated by multiplying the reinsurance recoverable asset amount(s) clearly identified to the Specific LAPP Policy by a Reinsurance Risk Capital Factor of 2%, irrespective of the Counterparty Grade of the reinsurer(s). 92B.For all other reinsurance recoverable assets of Civic Assurance, the Reinsurance Recovery Risk Capital Charge is the sum across all reinsurers of the reinsurance recovery asset in respect of each reinsurer multiplied by the Reinsurance Risk Capital Factor determined from Table 6. The reinsurer Counterparty Grade must be determined in accordance with Section 3.7 Determining Counterparty Grades. Standard Ends REVOKED

4 Website http://rbnz.govt.nz/finstab/insurance/ Email insurance@rbnz.govt.nz Telephone +64 4 471 3591 Mail Reserve Bank of New Zealand Prudential Supervision – Financial Policy PO Box 2498 WELLINGTON 6140 REVOKED