By Gareth Vaughan
The Reserve Bank is warning insurers that it's moving to a "more stringent" enforcement approach given they've now had more than two years to transition to their new regulatory obligations.
The central bank's prudential regulation of insurers has been phased in since January 2011. It has issued 50 full licences thus far. Insurers have until September 9 this year to obtain a full licence or exit the market. See more on the regulatory regime for insurers here and see the Reserve Bank's list of licenced insurers here.
In an insurance industry licensing update the Reserve Bank says; "The Bank advises it is moving into a more stringent approach to compliance breaches."
It goes on to add that; "There is still some room for improvement with regard to information being provided late, incomplete information being provided or around requirements not being adequately understood."
Evidence of tardiness by insurers cited by the Reserve Bank includes;
* Financial reporting being provided late.
* S78 reports not being filed with the Companies Office. These require an actuary's report to accompany the auditor's report in an insurer's financial statements.
* Annual and half-year certification not being completed and/or incorrect wording being used.
* Reserve Bank approval not being sought for material changes to fit and proper and risk management programs.
* Fit and proper certificates being provided late, outside the 20 working day timeframe.
* Solvency margin disclosure requirements on websites not being present.
* Overseas insurers not advising the Reserve Bank of new director notifications.
The Reserve Bank also notes that it has identified "some errors" in the application of relevant solvency standards, and "ambiguity" elsewhere which feedback has helped resolve. The regulator is also reminding insurers their websites must disclose "obvious links" to credit ratings from the homepage.
Asked what a more stringent approach might entail, a Reserve Bank spokeswoman told interest.co.nz this meant fully licensed insurers that breach requirements can expect to face the sanctions, eg fines, outlined in the Insurance (Prudential Supervision) Act 2010 unless "there are good reasons" why this isn't appropriate.
"The provisional licence period was a transitional phase for insurers to become familiar with prudential requirements and to make the changes needed to ensure compliance with full licence conditions," the spokeswoman added.
The Act outlines potential fines of up to $1 million as well as possible prison terms for serious breaches by licensed insurers.
Separately, the maximum penalty for anyone carrying out insurance business without holding a licence is imprisonment for up to three months and/or a fine of up to $200,000 for individuals, or up to $1 million for body corporates. The Reserve Bank can also apply to the High Court to have an unlicensed insurer liquidated.
In its sole public intervention as insurance prudential regulator so far, the Reserve Bank was last year unable to convince either the policyholders of insurer ACS (NZ) Ltd, formerly Ansvar, or a High Court judge of shortcomings it saw in a scheme of arrangement used to effect a managed withdrawal from New Zealand by the church, heritage building and rest home insurer whilst its directors stayed in control.
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