Insurance Industry says policyholder guarantee scheme unnecessary, and other news

David Hargreaves writes about how insurers are universally against development of a policyholder guarantee scheme on Most policyholders in focus group expressed some willingness to pay a little more for 'fully guaranteed insurance' so long as increased costs would not increase insurer profits.

The Reserve Bank has been pushed back fairly firmly by the insurance industry on suggestions of developing a policyholder guarantee scheme.

Last year the central bank said it was considering introducing a scheme to pay out claims in the event of an insurance company failing.

The concept would effectively insure policyholders against the risk of their insurer collapsing….

"They felt a scheme should be unnecessary if other regulatory settings were correct; would risk moral hazard; would increase costs for policyholders (in a market that already showed signs of underinsurance); and would be an inefficient way of providing protection," the RBNZ said in its submissions summary.

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Reserve Bank's consultation on insurance legislation finds financial information insurers publish is broadly appropriate

2022 Budget raises annual operating funding of FMA

Allianz Global Insurance Report finds premiums jumped by 5.1% in 2021

Government criticised for allocating funds to ACC to work on NZIIS before MBIE’s analysis of consultation on scheme released, and other news

Jenée Tibshraeny writes in NZ Herald of how the government has been critiqued for pushing through legislation to allow ACC to work towards operationalising the NZISS ahead of the Ministry of Business Innovation and Employment’s (MBIE) analysis of submissions made via the consultation process. MBIE has said a formal decision on whether the government will proceed with the scheme will be made in June or July.

MBIE's acting manager of income insurance policy, Francis van der Krogt, told NZ Herald around 2000 people or organisations either made full submissions or answered a shorter-form survey.

He said officials are analysing the feedback and preparing a summary for Ministers, which will be released "in due course".

Asked why the submissions weren't published before the legislation was passed and funding allocated via the Budget, van der Krogt noted the legislation is a "small and relatively technical piece of legislation" that enables ACC to do work it wouldn't otherwise be able to do under existing legislation.

"The work will help inform final decisions. Any substantive legislation to create a New Zealand Income Insurance scheme would go through a full Parliamentary process," van der Krogt said.

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Government commits to providing ACC funding for preliminary work on systems and operational processes for NZIIS
WTW introduces new version of Radar pricing software

Legal and regulatory update for the life and health insurance sector

19 May 2022 – Takeovers Panel issued updated Guidance on Schemes of Arrangement and also issued comment on “Deal Protection Devices”.

19 May 2022 – IRD advised of the introduction into Parliament of the Taxation (Cost of Living Payments) Bill and the Bill was passed through all Parliamentary stages under urgency in an extended Parliamentary session.

19 May 2022 - Companies Office Registers Funding Validation Bill introduced to Parliament to amend 13 different Acts to retrospectively validate fees that have been collected under those Acts that have been, or will be applied under any register administered by the New Zealand Companies Office.

19 May 2022 – The Ministry of Business, Innovation and Employment (MBIE) reported that the Government has agreed through Budget 2022 to increase the Financial Market Authority (FMA) annual operating funding from $60.805 million to $76.401 million in 2025/26. As part of the new funding arrangement, the Government has agreed to set new industry levies following consultation last year. The levy increase will be phased in over 4 years to minimise the burden on the financial sector. The levies have also been apportioned by entity size and type, to ensure smaller entities are not unduly burdened with high costs. Currently, the majority of the FMA’s funding is recovered from market participants through the FMA levy (83%), with the Crown contributing the remaining 17%. The proportion of the Crown’s contribution is decreasing slightly to 16% from 2025/26. Through Budget 2022, the Government has agreed to contribute all capital funding and some operational funding for CoFI and CRD towards the FMA, which will provide some cost relief to entities. While MBIE and the FMA also consulted on funding requirements for the Insurance Contract Law (ICL) regime, decisions about funding for this regime will be made at a later date. Any levies for this regime will take effect after the Insurance Contracts Bill has been passed by Parliament.

20 May 2022 – Under an extended Parliamentary session from 19 May 2022, the Income Insurance Scheme (Enabling Development) Bill was read a first time, with the Second Reading continuing while writing this.

Legal and regulatory update for the life and health insurance sector

10 May 2022 – Government announced further Russian sanctions targeting disinformation and those responsible for cyber-attacks on Ukraine.

10 May 2022 – Third reading of the Protected Disclosures (Protection of Whistleblowers) Bill completed in Parliament, with the Ombudsman issuing a statement welcoming its passage.

10 May 2022 Committee stage of the Retail Payment System Bill completed in Parliament.

11 May 2022 – Ministry of Business, Innovation and Employment released a consultation on a Draft Long-term Insights Briefing on the future of business for Aotearoa New Zealand, with submissions closing on 24 June 2022. The focus is on an exploration of 2 trends influencing productivity and wellbeing – purpose-led business and use of blockchain technology.

11 May 2022 – Third Reading of the Retail Payment System Bill completed in Parliament.

Legal and regulatory update for the life and health insurance sector

8 April 2022 – MBIE released a consultation seeking feedback on a legislative response to Modern Slavery and Worker Exploitation, Forced Labour, People Trafficking and Slavery, with submissions closing on 7 June 2022.

11 April 2022 – 11 April 2022 – Financial Services Council released details of a webinar held on 5 April 2022 titled, “Outlook for the insurance sector - Building a sustainable and trusted life and health insurance sector.” Clare Bolingford, FMA CEO, led the session with a presentation on the FMA outlook for the industry, followed by a select group of panellists discussing the key issues.

Legal and regulatory update for the life and health insurance sector

5 April 2022 – FMA released a speech presented by Clare Bolingford FMA Director of Banking and Insurance, to the FSC's: "Outlook for the insurance sector - Building a sustainable and trusted life and health insurance sector" webinar, during which she announced FMA plans to facilitate forums, starting next month, to get both providers and intermediaries in the same room to arrive at an industry led solution to how fair customer outcomes can be achieved within the bounds of commercial realities under the Conduct of Financial Institutions (COFI) regulation.

6 April 2022 – The Privacy Commissioner released a copy of the Commission’s submission to the Governance and Administration Parliamentary Select Committee on the Data and Statistics Bill.

6 April 2022 – MBIE sought feedback on feedback on 2 exposure drafts, one on the Credit Contracts and Consumer Finance Amendment Regulations 2020 (the Regulations) and another on Chapter 5 of the Responsible Lending Code (the Code), with submissions closing on 20 April 2022.

Legal and regulatory update for the life and health insurance sector

30 March 2022 – The third reading was completed in Parliament for the Commerce Amendment Bill.

31 March 2022 – RBNZ released a three-part analytical note that analyses the past experiences of different ethnicities, age groups, sexes, and regions during past recessions in New Zealand.

31 March 2022 – NZ Police Financial Intelligence Unit released its February 2022 “Suspicious Activity Report”.

Legal and regulatory update for the life and health insurance sector

22 March 2022 – Government announced its intention to introduce a Bill this year “to crackdown on global and domestic criminals who use businesses to hide money laundering, tax evasion and the financing of terrorism. It will include changes to the rules around beneficial owners to make it easier to see who owns or controls a company.”

22 March 2022 – The Privacy Commissioner confirmed Privacy Week this year is 9 - 15 May 2022 with a call for proposals and event ideas. The theme is Privacy: The Foundation of Trust.

Release of Cabinet Papers on the CoFI Bill and update on progress

An update on the progress of the Financial Markets (Conduct of Financial Institutions) Amendment Bill (the Bill) and release of papers on the subject has been made by MBIE staff:

As you may be aware, the Bill is currently awaiting the completion of its second reading. In 2021, MBIE released two discussion documents which consulted on proposed policy changes to the Bill and regulations to be made under it. At the beginning of this year, the Minister of Commerce and Consumer Affairs sought to the approval of Cabinet to make changes to the Bill and introduce some regulations, informed by this consultation.

The proposals included:

  • ensuring that the Bill’s provisions as they apply to intermediaries are appropriately targeted, workable and do not duplicate other regulatory requirements
  • changing the Bill to appropriately capture the Lloyd’s insurance market
  • adding a requirement to the Bill for financial institutions to take into account the potential for customers to be in vulnerable circumstances when designing their fair conduct programmes
  • making regulations under the Bill to prohibit the offering of sales incentives based on volume or value targets to employees and intermediaries.

Cabinet has recently agreed to the Minister’s proposals, and has authorised the drafting of a Supplementary Order Paper and appropriate regulations to give effect to these changes.

In the interests of keeping all interested parties informed of the Bill’s progress, MBIE has this morning proactively released the Cabinet Paper, Regulatory Impact Summary, and the Cabinet Minute on its website. You can find these documents here, alongside previously released documents:

Should you have any questions about the Bill, please email

Legal and regulatory update for the life and health insurance sector

16 March 2022 – The Commission for Financial Capability released commentary titled, “A deep dive into Pacific People’s financial capability.”

17 March 2022 – FMA update released, including the following:

  • Speech by Samantha Barrass, FMA Chief Executive, to Financial Services Council Connect

  • ‘No action’ relief as a result of COVID-19

  • a project to review five existing class exemptions due to expire this year, with consultations on the last two also released today, with submissions closing on 11 April 2022:
    • Multiple-participant Schemes - Participation Agreements exemption notice 2017, expires 22.10.22
    • Disclosure Using Overseas GAAP exemption notice 2021, expires 3.11.22
    • Financial Statements for Schemes Consisting Only of Separate Funds exemption notice 2017, expires 17.12.22
    • Irrigation Companies exemption notice 2018, expires 31.12.22
    • Small Co-operatives exemption notice 2021, expires 31.12.22

17 March 2022 – MBIE advised of the release of a range of documents relevant to the legislative proposals relating to the Conduct of Financial institutions (CoFI). The documents are available on the MBIE dedicated CoFI webpage.