Reserve Bank of New Zealand Insurance Industry Update May 2022

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UNCLASSIFIED Ngā Karere Inehua Insurance Industry Update 17 March 2022 Tēnā koutou katoa, I hope this update finds you well amid the ongoing disruption caused by the COVID-19 pandemic. This year marks a change in roles for me, as I step away from my former role as Assistant Governor/General Manager of Money Group and into my new role as Deputy Governor/General Manager of Financial Stability. I’m excited by the opportunities ahead, and know building and strengthening relationships with the sector will be key to us achieving what we have set out to achieve. I want to issue a note of thanks to my predecessor Geoff Bascand for his contribution to the Reserve Bank and wider financial system, and acknowledge the thorough and professional handover that that Geoff provided me before Christmas. It has helped immensely. My role is to ensure we are working together, connected and co-ordinated, living up to the name kotahitanga - which loosely translates to ‘unity’ and ‘connection’. We have a strong desire to build and maintain our relationship with you and to achieve the best possible ‘regulator-regulated’ supervisory relationships with regulated entities as we maintain our focus and commitment as the kaitiaki

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UNCLASSIFIED (guardians) of New Zealand’s financial system. This Insurance Industry Update was created to include our stakeholders in our efforts to embrace kotahitanga and follows on from the valuable feedback we received in our last Relationship Charter survey. This update provides a brief summary of all the key projects, initiatives and changes within the insurance sector and is one element of our efforts to improve the clarity, consistency and timeliness of our communications with you. We will be conducting another Relationship Charter survey in early April, so please watch out for an email from our research company, fiftyfive5. Our refreshed website, and the Council of Financial Regulators Insurance Forum (see below) are other important elements of our work in this space. We really do value the feedback that you provide us on our consultations, and in our regulatory interactions. It helps to make our policies more fit for purpose for both the industry, and also for us as the regulator. If you find these newsletters valuable, or have any other suggestions on how you’d like to engage with us, we’d like to hear from you. If you would like to hear more from us, we encourage you to sign up to our email alerts, via our website – just submit your email and click the Insurers topic. We are also planning to hold in person Directors and Senior Officers workshops for insurers around the middle of this year, COVID-19 restrictions permitting. We have run these previously for the banking sector, and found them to be a popular and productive forum to build relationships and facilitate the open exchange of views between senior members of the industry and their regulators. We believe that these workshops will provide a similarly productive and valuable forum to the insurance industry also, and we look forward to shaping their format with you. More details will be communicated to registered insurers via your supervisor once we pass the peak of the Omicron outbreak and can reschedule our in person engagements. If you have any topics or issues you’d like to cover in our first forum, please share your feedback with us.

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UNCLASSIFIED Kia kaha, Kia māia, Kia manawanui, Kia ora koutou katoa! Christian Hawkesby The Future of Supervision RBNZ is expanding and becoming more active in addressing vulnerabilities in the financial sector. Scott McKinnon, Senior Manager Supervision, delivered a speech about RBNZ’s approach to prudential regulation. The speech discusses how supervision is evolving in line with our own, and society's, risk tolerance. Scott also outlines what RBNZ sees as emerging risks and structural changes to New Zealand’s financial system that further underlines the need for increased regulation and supervision. His speech is available to read via the button below. Read more Change in insurance supervision personnel We have recently said farewell to our Manager Insurance Supervision and FMI

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UNCLASSIFIED Oversight Richard Dean who retired after 14 years with us. Shortly after joining the Bank in 2008 Richard led the creation and delivery of the insurance prudential legislation, the Insurance (Prudential Supervision) Act 2010, and over the years he has also led the Operational Policy, Banking, FMI and AML supervisory teams. Managing the supervision of approximately 90 licensed insurers in New Zealand kept him busy for the last four years. His experience and competence across his various roles have been assets to the Reserve Bank, and Richard leaves with our gratitude and best wishes for his retirement. Richard has advised that his retirement plans include devoting more time to family, golf and opera singing. Two very capable appointees have picked up from where Richard left off and are already engaging with the sector. Stan Christian will be leading insurance supervision from Auckland and Tom Cain will be leading in Wellington. Policy development – IPSA and Solvency standards The IPSA (Insurance (Prudential Supervision) Act) review continues to make good progress. The original IPSA Act was enacted in September 2010 to bring New Zealand up-to-date with international standards for prudential regulation. It is good regulatory practice to review legislation to ensure it is working effectively and takes into account any lessons learned over the past 12 years. We’ve had great engagement in the review so far, so thank you to everyone who has provided input and ideas. We’ve enjoyed engagement via the IPSA webinars we ran, and found them to be a great tool to canvas thoughts and feedback as we all managed with COVID restrictions. We’ll continue to utilise them as one of our communications channels with the industry to encourage engagement.

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UNCLASSIFIED We have just issued a new paper for consultation on the enforcement and distress management powers in IPSA. This consultation is the third of five that we are conducting as part of our IPSA review. IPSA currently includes a range of criminal penalties for non-compliance with regulation. In this consultation, we discuss introducing other types of sanctions and penalties to allow a more proportional and graduated response to compliance issues. If you haven’t already, we encourage you to give it a read and let us know your thoughts on what we’re proposing. Read More We have also just published our response to last year’s consultation on the Draft Industry Solvency Standard, which was shaped by valuable feedback we received during the consultation. Our formal response has just been published and we encourage you to read it. We’re committed to making the standard even more workable, and will continue to engage with industry representatives ahead of its finalisation in September. In April we will be publishing a feedback statement following last year’s Policyholder Security consultation, including some input from a series of focus groups selected from the general public. Read More RBNZ Webinar ISPA enforcement and distress management consultation and Insurance interim solvency standard The Reserve Bank of New Zealand - Te Pūtea Matua will be holding a webinar on the Insurance (Prudential Supervision) Act (IPSA) 2010 enforcement and distress management consultation and feedback received on the draft interim

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UNCLASSIFIED solvency standard for insurers at 12pm next Tuesday, 22 March via Microsoft Teams. You can join the webinar via this link. If at any time during the call, you disconnect or your connection lags, you can re-join by clicking the link provided or by dialling in via the phone conference details: +64 4-889 5741,,293483522# New Zealand, Wellington Phone Conference ID: 293 483 522# You may send questions in advance to ipsareview@rbnz.govt.nz. We will also invite questions during the webinar via the chat box. Council of Financial Regulators Insurance Forum The Insurance Forum is a new sub-committee of the Council of Financial Regulators (CoFR) which was established in October 2021. We believe these forums will be a valuable engagement, to ensure we have open communication that will continue to benefit the sector. We hope they hold as much value to you as they do us. The forum meets quarterly and aims to contribute to the efficiency and coordination of insurance sector regulation by providing a space to discuss risks, issues and on-going and up-coming regulatory matters relating to licensed insurers. The group held its second meeting in February 2022, and topics covered including upcoming regulatory initiatives for 2022, the risks facing the sector and the work currently under way on climate change issues. The permanent members of the Insurance Forum include: • The Reserve Bank of New Zealand (RBNZ) • The Treasury • Commerce Commission

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UNCLASSIFIED • Financial Markets Authority (FMA) • Ministry of Business, Innovation and Employment (MBIE). • Financial Services Council (FSC) • Insurance Council of New Zealand (ICNZ) • Financial Services Federation (FSF) • Earthquake Commission (EQC) Website upgrade We’re refreshing our website to better suit the needs of our audiences. The refreshed website will be delivered on a modern and secure platform later this year. It will provide an improved user experience, better search engine, and modern design. We will have more information out closer to the time about what you can expect from the new site and when it will become available. Copyright © 2022 Reserve Bank of New Zealand, All rights reserved. You are receiving this email because you opted in via our website. Our mailing address is: Reserve Bank of New Zealand 2 The Terrace Wellington, 6140 New Zealand