While the Reserve Bank of New Zealand (RBNZ) could seek satisfaction over the performance of the banking, finance and insurance sectors, it has reasons to be worried over New Zealand’s exposure to some overseas markets that are considered risky.
The Bank is currently evaluating a number of key projects and initiatives, which would address these risk factors but inevitably lead to greater supervision and control.
Its ‘Work in progress’ includes Financial reporting changes, Risk governance review, Insurance data collection, Fit and proper reassessments and Policy initiatives.
A notification posted on the RBNZ website said that the Bank’s focus is on designing a risk-based framework for business with appropriate supervision.
“This is a significant piece of work and requires careful consideration of many factors and related work streams. The sector will be kept informed of developments.”
The Bank published its six-monthly Financial Stability Report (FSR) in May 2014, in which it assessed the soundness and efficiency of the New Zealand financial system. The Report also contained a commentary on the insurance sector
Financial Reporting
RBNZ has made several significant changes to legislation affecting financial reporting requirements. Enforced on April 1, 2014, these changes repealed the Financial Reporting Act 1993, brought into force the Financial Reporting Act 2013, and made material amendments to the Financial Markets Conduct Act 2013 and the Companies Act 1993.
The Insurance (Prudential Supervision) Act 2010 (IPSA) was amended as a result, as were the associated regulations. In addition, an earlier amendment in September 2013 to section 81 of IPSA reduced reporting timeframes for interim financial information.
“These changes will affect licensed insurers,” the Bank said.
In general, for annual balance dates from March 31, 2015, financial statements (for insurers not exempt from section 81 of IPSA) should be given to RBNZ within four months of the balance date. The four- month timeframe already applies to interim financial information.
Solvency issues
In addition to the requirements of section 81 of IPSA, the Bank has imposed reporting timeframes on insurers in many other ways. Among them are the following:
Solvency standards set out timeframes for the provision of annual and half-yearly solvency returns and associated financial information.
Solvency exemptions under section 59 of IPSA specify timeframes for demonstration of solvency on a home basis, and for the provision of a Financial Condition Report.
Conditions of licence impose a certification requirement in respect of annual and half-year balance dates.
“The Bank is considering aligning reporting timeframes, for its own requirements, to the recent legislative changes. No decisions have yet been made in this area. Any change recommended to solvency standards would be consulted on as part of the planned wider consultation on solvency standards mentioned elsewhere in this update. Proposed changes to conditions of licence would also be subject to consultation with each individual insurer.”
If a decision is taken to align the reporting dates, it is likely that this would be phased in for insurers to coincide with the application of the new legislative reporting timeframes.
In addition to considering reporting timeframes, RBNZ is reviewing other changes to the financial reporting legislation, to revise any of its documentation as required.
For example, where documents refer directly to the Financial Reporting Act 1993, this will need to be updated.
Insurance data
RBNZ is establishing a regular insurance data collection and reporting system. This is required for efficient prudential supervision of insurers and monitoring and analysis of developments at the sectorial level. Insurance statistics will be published late next year.
The design of an insurer return and reporting of key information is well underway. The design will take into account the Insurance (Prudential Supervision) Act 2010 and Regulations, and be appropriate to the New Zealand industry.
“We intend to consult on a proposal around August 2014. There will be some explanatory seminars by RBNZ during the consultation. Depending on the feedback, there may be further consultation before requirements are finalised. The aim is for implementation in 2015 and we plan to have a practice submission by insurers before the requirements come into effect,” the website notification said.
