Insurance (Prudential Supervision) Act 2010

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Reprint as at 1 April 2014

Insurance (Prudential Supervision) Act 2010

Public Act2010 No 111
Date of assent7 September 2010
Commencementsee section 2

Note

Changes authorised by subpart 2 of Part 2 of the Legislation Act 2012 have been made in this official reprint.

Note 4 at the end of this reprint provides a list of the amendments incorporated.

This Act is administered by the Reserve Bank of New Zealand.


Contents

1 Title

2 Commencement

Part 1
Preliminary provisions

Purposes and principles

3 Purposes

4 Principles to be taken into account under this Act

Overview

5 Overview

Interpretation

6 Interpretation

7 Meaning of contract of insurance

8 Meaning of carrying on insurance business in New Zealand

9 Bank may declare that person is not carrying on insurance business in New Zealand in certain circumstances

10 Meaning of associated person and holding entity

11 Application of Act to friendly societies and credit unions

Bank's functions

12 Bank's functions under Act

13 Bank must have regard to directions about Government policy objectives

Act binds the Crown

14 Act binds the Crown

Part 2
Licensing and prudential regulation of insurers

Subpart 1Licensing of insurers

Requirement to be licensed

15 Persons that carry on insurance business in New Zealand must be licensed

16 Offence for person who is not licensed insurer to hold itself out to be licensed insurer

Process for obtaining licence

17 Application for licence as insurer

18 Applicant must provide fit and proper policy, fit and proper certificate, and risk management programme

19 Entitlement to licence

20 Carrying on business in prudent manner

Conditions of licence

21 Conditions of licence

22 Bank may modify conditions of licence

23 Offence to fail to comply with conditions of licence

24 Licensed insurer must report likely failure to comply with solvency margin imposed under licence conditions

Notification of decision

25 Bank must notify applicant of decision and give notice on register

Bank must be notified before control is obtained and before corporate form is changed

26 Bank must be notified before control is obtained

27 Bank must be notified before corporate form is changed

28 Bank must consider whether it is still satisfied as to licensing matters

29 Offence to fail to notify or provide information

Cancellation of licence

30 Cancellation of licence

31 Assignment of liabilities to enable cancellation

32 Bank's approval of assignment

33 Effect of assignment

Fit and proper requirements

34 Licensed insurer must be subject to fit and proper policy for directors and relevant officers

35 Group fit and proper policy

36 Fit and proper standards

37 Licensed insurer must provide fit and proper certificate for new directors or relevant officers or if Bank requires certificate

38 Bank may exempt overseas insurers from compliance with section 37(1)

39 Power to remove directors and relevant officers

40 How power to remove is exercised

41 Former director or relevant officer must not accept reappointment in breach of direction

42 Appeals from Bank's decision

43 Appeal to Court of Appeal on question of law

Transfers and amalgamations

44 Transfers and amalgamations must be approved

45 Request for approval

46 Actuarial or other report on transfer or amalgamation proposal

47 Costs of report

48 Bank must have regard to certain matters in considering request

49 Bank's decision on approval

50 Offence to fail to comply with conditions of approval

51 Requirement for approval is in addition to requirements under other enactments

52 Transfer or amalgamation not invalidated

53 Effect of assignment for purposes of approved transfer

Publication of policies

54 Publication of policies

Register

54A Register

Subpart 2Prudential regulation of insurers

Solvency standards

55 Bank may issue solvency standards

56 Matters that may be contained in solvency standards

57 Offence to fail to comply with reporting and disclosure requirements

58 Incorporation by reference [Repealed]

59 Bank may exempt overseas insurers from compliance

Financial strength ratings

60 Licensed insurer must have current financial strength rating

61 Financial strength rating must refer to overseas policyholder preference

62 Bank may approve rating agencies

63 Licensed insurer must notify Bank of change in rating or credit watch warning

64 Disclosure of current rating to policyholder

65 Disclosure by insurers not required to be rated

66 Policyholder may cancel if disclosure is not made

67 Disclosure of rating on licensed insurer's Internet site

68 Other advertising of ratings

69 Licensed insurer must give public notice of downgrade or notice to policyholders

70 Licensed insurer must not disclose or advertise ratings from non-approved agencies

71 Offence to fail to comply with disclosure obligations

Disclosure of overseas policyholder preference

72 Overseas insurer must disclose overseas policyholder preference

Risk management

73 Licensed insurer must be subject to and comply with risk management programme

74 Group risk management programme

75 Offence to fail to comply with risk management requirements

Appointment of actuary and actuarial review

76 Requirement for licensed insurers to have appointed actuary

77 Review of actuarial information in, or used in the preparation of, financial statements

78 Appointed actuary's report

79 Provisions relating to auditor's report

80 Access to information

Supply of financial statements

81 Financial statements and interim financial information must be given to Bank

Subpart 3Statutory funds of life insurers

General requirements

82 Requirement that life insurer have statutory funds

83 Overview of requirements regarding statutory funds

84 Meaning of life policy

85 Composite policies

86 Interpretation in this subpart

87 Duty of life insurer in relation to statutory funds

88 Notice to Bank when fund established

89 Life insurer must transfer assets on establishment

90 Assets of statutory fund

91 Identification of life policies referable to statutory fund

92 Payments to statutory fund

93 Capital payments to statutory funds

94 Expenditure and application of statutory fund

95 Prohibition of reinsurance between funds

96 Effect of non-compliance with section 94: general

97 Effect of non-compliance with section 94: certain classes of transactions

98 Investment performance guarantee: limit of certain liabilities

99 Investment of statutory funds

100 Recording of restricted investments

101 Transfer of assets between funds

102 Restriction on restructure or termination of statutory funds

103 Ascertainment of income and outgoings of statutory fund and providing for apportionment of income, outgoings, and liabilities

104 Life insurer must keep records of income and outgoings

Duties and liabilities of directors, etc

105 Duty of directors in relation to statutory funds

106 Bank may give notice

107 Liability of directors

108 Bank’s power to sue in name of life insurer

Restructure and termination of statutory funds

109 Restructure of statutory funds

110 Termination of statutory funds

Additional requirements for transfer of life policies between statutory funds by endorsement

111 Additional requirements for transfer of life policies between statutory funds by endorsement

Allocation of profits and losses and of capital payments and distribution of profits and capital

112 Life insurer must allocate operating profits and losses in accordance with prescribed requirements

113 Allocation of capital

114 Distribution of retained profits

115 Distribution of shareholders’ or members' capital

Application of statutory fund assets on liquidation or winding up

116 Application of statutory fund assets

Liability of directors for loss to statutory fund

117 Liability of directors for loss to statutory fund

Offence

118 Offence to fail to comply with subpart

Exemptions

119 Bank may exempt overseas insurers from compliance with subpart

Part 3
Prudential supervision of licensed insurers

Bank to undertake prudential supervision

120 Prudential supervision

Supply of information

121 Supply of information by licensed insurers for purposes of prudential supervision

122 Notice may require supply of information, data, or forecasts in relation to associated persons

123 Associated persons may be required to supply information to licensed insurers

124 Supply of information by other persons for purposes of prudential supervision

125 Requirement that information, data, or forecasts be audited or reviewed

126 Bank may require report relating to licensed insurers or associated persons

127 Disclosure of information to Bank by auditors and actuaries

128 Auditor or actuary to inform of intention to disclose

129 Protection of auditors and actuaries

Investigations

130 Investigations

131 Power to obtain information or documents

132 Power to enter and search place

133 Offences in relation to investigations

134 Effect of final decision that exercise of powers under sections 130 and 131 unlawful

Miscellaneous provisions

135 Confidentiality of information, data, documents, and forecasts

136 Limits on further disclosure of information, data, documents, or forecasts

137 Application of other enactments to information, data, documents, or forecasts published or disclosed under section 135

Part 4
Distress management

Subpart 1Recovery plans

138 Bank may require licensed insurer to prepare recovery plan

139 Recovery plan must be provided to Bank for approval

140 Licensed insurer must comply with recovery plan

141 Amendments to recovery plan

142 Offence to fail to comply with recovery plan requirements

Subpart 2Directions to licensed insurers and associated persons

143 Bank may give directions to licensed insurer

144 Scope of directions to licensed insurer

145 Bank may give directions to associated person

146 Scope of directions to associated person

147 Miscellaneous matters relating to directions

148 Offence to contravene directions

149 Power to remove, replace, or appoint directors, auditor, or actuary

150 Offence to disclose giving of direction or notice

Subpart 3Liquidation or voluntary administration of licensed insurers

Bank may apply to put insurer into liquidation or voluntary administration, or apply for reduction of value of contracts of insurance

151 Bank may apply for liquidation of insurers

152 Bank may apply for High Court to reduce value of contracts of insurance

153 Bank may apply for voluntary administration of licensed insurers

Bank's approval for voluntary liquidation or appointment of administrator by company

154 Bank's approval for voluntary liquidation or appointment of administrator by company

Bank's participation in insolvency procedures and certain other proceedings

155 Bank may make certain applications in respect of voluntary administration or liquidation and appear and be heard in proceedings

156 Bank's participation in arrangements, amalgamations, and compromises under Companies Act 1993

157 Bank must be sent copy of applications under Parts 14 to 16 of Companies Act 1993

158 Bank must be sent copies of certain documents and may inspect certain accounts and records

159 Attendance of representative of Bank at certain meetings for licensed insurer in voluntary administration, subject to deed of company arrangement, or in liquidation

160 Bank may require meeting of creditors or shareholders to appoint liquidation committee

Special insolvency provisions for insurers

161 High Court may reduce value of contracts of insurance

162 High Court may require actuarial report

163 Continuation of life policies if insurer in liquidation

164 Liquidator or deed administrator may apply to High Court for approval of scheme of transfer of insurance business

165 Right to attend and be heard

166 Approval of scheme

167 Effect of approval

168 Application by Bank for directions to liquidator, administrator, or deed administrator

169 Valuation of policies by liquidator or deed administrator

Subpart 4Statutory management

Commencement of statutory management

170 Statutory management of licensed insurers and associated persons

171 Statutory management of overseas persons

172 Date and time of appointment

173 Grounds on which licensed insurer may be declared to be subject to statutory management

174 Grounds on which associated person may be declared to be subject to statutory management

175 Bank must give notice of recommendation

176 Application of this subpart to joint statutory managers, associated persons, and subsidiaries

177 Continuation of statutory management of companies restored to New Zealand register

Exercise of powers

178 Considerations affecting exercise of powers by statutory manager

179 Statutory manager to comply with directions of Bank

Application of Corporations (Investigation and Management) Act 1989

180 Application of Corporations (Investigation and Management) Act 1989

181 Act does not limit application of Corporations (Investigation and Management) Act 1989

Power to obtain documents and information

182 Powers to obtain documents and information

Sales and dispositions

183 Sale requires Bank's approval

184 Consents not required under other enactments

Body corporate may be formed to acquire branch of overseas person

185 Statutory manager may form body corporate to acquire business of branch of overseas person

186 Vesting of property subject to security

187 Proof of vesting

188 Provisions applying if liabilities included in sale

Obligations incurred by statutory manager

189 Obligations incurred by statutory manager

Value of contracts of insurance

190 Statutory manager may value contracts of insurance

191 Value of contracts of insurance may be reduced by Order in Council

Auditor, actuary, and annual financial statements and records

192 Appointment of auditor and actuary

193 Prior auditor or actuary ceases to hold office

194 Removal of auditor or actuary

195 Annual financial statements

196 Annual report by statutory manager

Termination of statutory management

197 Termination of statutory management by Order in Council

198 Termination of statutory management on liquidation

199 Time of termination

Part 5
Miscellaneous provisions

Provisions relating to Lloyd's

200 Lloyd's underwriters must not carry on insurance business in New Zealand unless Lloyd's holds licence

201 Lloyd's may apply for licence on behalf of underwriting members

202 Lloyd's fit and proper policy and risk management programme

203 Bank must issue temporary licence to Lloyd's pending consideration of its application

204 Lloyd's underwriters may carry on insurance business in New Zealand if Lloyd's holds licence

205 Issue of licence to Lloyd's

206 Conditions of Lloyd's licence

207 Obligations on Lloyd's

208 Provisions that do not apply in respect of Lloyd's or Lloyd's underwriters

209 Bank may direct that Lloyd’s underwriters must not issue or renew contracts of insurance

210 Agent of Lloyd’s and address for service

211 Lloyd’s to give notice of enactments and bylaws

212 Act does not authorise Lloyd’s underwriter to carry on any business underwriter could not otherwise have carried on

Access to information by overseas supervisor

213 Access to information by overseas supervisor

214 Duties of person on receipt of notice under section 213

Offences

215 False declarations and representations

216 Liability of directors

217 Defence for offences against this Act

217A Time for filing charging document

Prohibition against falsely holding out New Zealand connection

218 Prohibition against falsely holding out New Zealand connection

219 Certain New Zealand persons and overseas companies prohibited from using certain words in name

220 Prohibition does not apply in certain cases

Restriction on insurer's constitution

221 Insurer's constitution must not permit directors to act in holding entity's best interests even though it is not in insurer's best interests

Ban ordered by District Court

222 Power to ban certain persons from participating in insurance business

223 Notice of hearing

224 Appeals to High Court

225 Appeal to Court of Appeal on question of law

226 Register of banned persons

227 Search of register

228 Offence for banned person to participate in insurance business in breach of order

Notice and service

229 Notice and service of documents

Protection from liability and indemnity

230 Protection from liability

231 Indemnity

General provisions relating to declarations and exemptions

232 General provisions relating to declarations and exemptions

General provisions relating to fit and proper standards and solvency standards

233 Status of standards

234 Public notice of standards

235 Consultation

236 Bank may amend, revoke, or replace standard

Regulations

237 Regulations

238 Regulations may provide for exemptions

Incorporation by reference

238A Incorporation by reference

Repeals and consequential amendments

239 Amendments to Life Insurance Act 1908

240 Repeals

241 Amendments to other enactments

242 Amendment to Financial Service Providers (Registration and Dispute Resolution) Act 2008

Transitional and savings provisions

243 Bank may approve certain transfers

244 Bank must issue provisional licence pending consideration of application

245 Bank may also issue provisional licence for insurer that is or will be in run-off

246 Duration of provisional licence

247 Provisional licence holder only required to comply with requirements to extent required by conditions

248 Conditions of licence

249 Public Trust must return deposits

250 Deposit may be withdrawn in accordance with Insurance Companies' Deposits Act 1953 or Life Insurance Act 1908

251 Savings in respect of judicial management

Schedule 1
General provisions relating to incorporation by reference

Schedule 2
General provisions relating to search powers

[Repealed]

Schedule 3
Consequential amendments

Reprint notes


The Parliament of New Zealand enacts as follows: