The Reserve Bank is warning Quest Insurance Group over failures to comply with the Insurance Prudential Supervision Act (IPSA).
Quest Insurance provides vehicle and mechanical breakdown insurance as well as lifestyle protection and guaranteed asset protection (GAP) insurance. Quest’s parent company is Geneva Finance.
The Reserve Bank said on Tuesday it began a formal investigation into Quest Insurance after the insurer self-reported two matters in 2021 and 2022.
With the investigation now completed, the Reserve Bank has issued a non-compliance warning to Quest Insurance.
According to the Reserve Bank, Quest’s non-compliance included prolonged failures to maintain its minimum non-life solvency margin, and to maintain a statutory fund for its life insurance business which pointed to Quest not having “prudent controls” in place.
The compliance breaches didn't impact Quest’s ability to pay out on claims to policy holders.
The Reserve Bank added Quest had acknowledged and remedied the breaches of its obligations and was in the process of implementing further risk management measures to prevent similar issues in future.
“This warning is a reminder for all insurers of the importance of continuously managing their compliance obligations under IPSA through effective risk management and sound governance practices,” the central bank said.
The RBNZ wrote in its warning letter to Quest that failure to comply with its fundamental obligations as an insurer could amount to strict liability offenses under IPSA and liable to fines of up to $500,000 for each offense.
However, only a Court can determine whether Quest has committed an offense under IPSA.
“If any instances of Quest’s non-compliance with IPSA are identified in the future, the Reserve Bank will take into account this warning in the consideration of an appropriate enforcement response, which may involve criminal proceedings in relation to any new offending by Quest,” the prudential regulator said.
“Should this occur, the Reserve Bank reserves the right to bring this warning to the Court’s attention in any future proceedings against Quest and/or its directors.”
Christian Hawkesby, the Reserve Bank’s Deputy Governor and General Manager of Financial Stability, said prudential requirements for insurers existed to protect policy holders and “to promote the maintenance of a sound and efficient insurance sector”.
“The findings from this investigation demonstrate the importance of effective risk management and the need for sound governance to ensure the New Zealand public has trust and confidence in the insurance sector,” Hawkesby said.
Quest’s Managing Director Malcolm Johnston told interest.co.nz in a statement the insurer had fully cooperated with the Reserve Bank’s inquiries and the central bank’s investigation has confirmed Quest’s overall solvency was maintained at all times.
“Most importantly, the Reserve Bank investigation has found that these potential breaches did not affect Quest’s ability to pay sums due to policyholders,” he said.
Johnston added that Quest has since strengthened its oversight, governance and operational processes and controls to prevent issues recurring in the future.
The Reserve Bank is currently reviewing IPSA. The IPSA review began in 2016, completing the first stage of the review in 2017. Progress then ground to a halt until the review was relaunched in 2020.
The most recent work on the IPSA review was completed at the end of 2023 when the Reserve Bank launched its final omnibus consultation.
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