General insurer Tower says it is "in discussion" with the Reserve Bank regarding "proposed imposition of conditions", including an increase to its minimum solvency margin.
The disclosure was made in a brief announcement to sharemarket operator NZX today. Tower shares were down 1c to NZ$1.99.
Earlier this year the RBNZ warned that it was taking a "more stringent" enforcement approach given that insurers now had more than two years to transition to their new regulatory obligations.
Tower's chief executive David Hancock said the discussions with the RBNZ were in regard to Tower's Provisional Licences issued under section 248(1)(e) of the Insurance (Prudential Supervision) Act 2010.
"A further announcement regarding the outcome of this discussion, including any alterations in the conditions, will be made in due course."
An RBNZ spokesman said the central bank could not comment on the issue.
Tower has been selling off a number of its operations. When announcing its half-year result in late May outgoing CEO Rob Flannagan said the company's general Insurance business delivered a solid performance for the period and after all capital returns was exceedingly well capitalised, having more than NZ$127 million in capital above minimum solvency requirements.
"Tower is now strongly positioned to concentrate on being a simpler, dynamic and more agile business in a sector that is poised for growth,” he said.
Tower had increased its provisions for the February 2011 Christchurch earthquake by a further $14.2 million after taxation, driven by higher levels of inflation, the difficulty and delays in obtaining EQC data and new claims.
The RBNZ required from 7 March 2012 that all insurers carrying on insurance business in New Zealand (as defined by the Act) were required to be licensed. Insurers that were carrying on insurance business prior to 7 September 2010 and who advised of their intention to continue to carry on insurance business were able to be provisionally licensed under Section 244 of the Act while their full licence application was progressed. Insurers who intended to cease carrying on insurance business could apply under section 245 for a provisional run-off licence, requiring them to cease carrying on insurance business by 7 September 2013.
All insurers must be fully licensed under section 19 by 7 September 2013, in order to continue to carry on insurance business in New Zealand after that date.
New insurers must obtain a full licence before commencing insurance business in New Zealand.
Licences may be cancelled for a number of reasons as outlined in section 30 of the Act, ranging from an insurer ceasing to carry on insurance business due to a voluntary exit or transfer through to regulatory action.
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