The NEW ZEALAND – LIFE INSURANCE module informs licenced life insurance companies and their directors, auditors and actuaries about laws and regulations that need to be complied with in order to obtain a licence and then operate and maintain a business providing life insurance in New Zealand.
The NEW ZEALAND – LIFE INSURANCE module covers the obligations imposed on insurers by The Insurance (Prudential Supervision) Act 2010 which applies to all insurers or Financial Services Providers (FSP’s) carrying out a life insurance business in New Zealand. The act is administered by the Reserve Bank of New Zealand (RBNZ) and includes;
- A licensing system for insurers, based on meeting prudential requirements. The licence issued may be either conditional or unconditional;
- Supervision by the RBNZ of compliance with the prudential requirements;
- Powers of the RBNZ in respect of insurers in financial distress or other difficulties.
The module covers the matters that the RBNZ must have regard to when considering the licence application to provide life insurance which include;
- Company resources and financial strength including that of the parent company (if applicable);
- An appropriate incorporation, ownership and governance structure at the time of licencing and also on an ongoing basis;
- The size and type of insurance business and the size and types of risks that are to be insured;
- Retain staff with requisite qualifications and experience;
- Information management, legal compliance and auditing;
- Risk management policies and procedures;
- Reinsurance arrangements;
- Any non-insurance business that the company conducts;
- Related-party risk exposures;
- Solvency and capital standards and requirements;
- Financial reporting requirements;
- Statutory fund compliance;
- Fit and Proper status of directors and company officers;
Once licensed the life insurance provider maintains their licence by continuing to operate in a prudent manner in all instances. The module covers operational requirements and also applicable exemptions to ensure the company is compliant with their obligations;
- The company and its directors certify compliance with all licensing matters;
- Processes are followed in the event of changes or potential changes to the structure, operation or business of the company;
- Maintenance of at least one statutory fund;
- That assets and liabilities which relate to life insurance policyholders are separated from the other assets and liabilities of the company;
- Solvency standard requirements are met;
- To establish and comply with their risk management program;
- Lodgement of financial statements;
- Accurate record keeping is maintained;
- To appointment a qualified auditor and a qualified actuary.
The module covers the obligations and potential liability of the appointed actuary, auditor and directors to make disclosures to the Reserve Bank once they are made aware of particular disclosable circumstances;
- That the company is failing to maintain a solvency margin, or is likely to fail to maintain a solvency margin at any time within the next 3 years;
- That the company is in serious financial difficulties;
- That the company is, or has been, operating fraudulently or recklessly.
A licensed life insurer may be subject to an investigation by the RBNZ if the RBNZ has reasonable cause to suspect that the insurer has breached its obligations under the legislation. The module covers the obligations of the licensed life insurer to assist with the investigation by supplying information, data or forecasts that are in the custody or control of the company, its officers, its employees, or other associated persons about any matters relating to;
- Its business (carried on either in New Zealand or elsewhere, or both);
- Its operation;
- Its management (including corporate, financial or prudential matters).
The module also covers obligations of life insurance providers which may apply in specific circumstances, including;
- To prepare a distress management recovery plan upon receipt of a written direction from the Reserve Bank;
- Calculating taxation to reflect both a shareholder base and a policyholder base;
- Requirements for transfers between statutory funds;
- When resolving a dispute.
A licensed life insurance company must ensure that it has policies, procedures and structures in place enabling it to ensure compliance with the requisite laws and regulations as well as any directions issued by the RBNZ. The module covers the range of possible consequences to life insurance companies that do not meet their compliance obligations. The potential penalties include fines of up to $500,000 and the cancellation of their licence.
The NEW ZEALAND – LIFE INSURANCE module covers the obligations of entities operating a business providing life insurance in New Zealand. It does not cover the obligations of entities providing general or other specialised forms of insurance.