(1) Every person who carries on insurance business in New Zealand must hold a licence.

(2) A person who carries on insurance business in New Zealand without holding a licence commits an offence and is liable on summary conviction,—

• (a) in the case of an individual, to imprisonment for a term not exceeding 3 months or to a fine not exceeding $200,000 (or both):

• (b) in the case of a body corporate, to a fine not exceeding $1,000,000.

(1) A person commits an offence if the person—

• (a) is not a licensed insurer; and

• (b) uses any name, title, trade mark, style, designation, or description that represents or implies that the person is a licensed insurer.

(2) Every person who commits an offence under this section is liable on summary conviction,—

• (a) in the case of an individual, to imprisonment for a term not exceeding 3 months or to a fine not exceeding $200,000 (or both):

• (b) in the case of a body corporate, to a fine not exceeding $1,000,000.

(1) Any body corporate that carries on insurance business in New Zealand, or proposes to carry on insurance business in New Zealand, may apply to the Bank to be licensed as a licensed insurer.

(2) Applications must be—

• (a) made in the manner that is specified by the Bank; and

• (b) accompanied by payment of the prescribed fee for the application (if any). 

(3) Every applicant must provide to the Bank the information that is required by the Bank to assist it in determining the application.

(4) An applicant commits an offence if it provides false or misleading information to the Bank for the purposes of an application and is liable, on summary conviction, to a fine not exceeding $1,000,000.

(1) An applicant must provide to the Bank with its application—

• (a) a copy of a fit and proper policy that complies with section 34; and

• (b) a certificate that—

  • (i) states that, in the opinion of all of the directors of the applicant after due inquiry by them, all of the directors and relevant officers of the applicant are, in accordance with the policy, fit and proper persons to hold their respective positions; and

  • (ii) is signed on behalf of all the directors of the applicant by at least 2 directors of the applicant (or, if the applicant has only 1 director, by that director); and

  • (iii) contains, or is accompanied by, a certificate from each director or relevant officer that is signed by the director or relevant officer and states that, in his or her opinion, he or she is, in accordance with the policy, a fit and proper person to hold the relevant position; and

• (c) a copy of a risk management programme that complies with section 73.

(2) For the purposes of subsection (1)(b), the person that the insurer intends to appoint as the appointed actuary must be treated as being a relevant officer.

(1) An applicant is entitled to be issued with a licence if the Bank is satisfied that—

• (a) the applicant holds a current financial strength rating that complies with section 60 (unless a rating would not be required immediately after the issue of a licence as a result of the application of section 60(2)); and

• (b) the applicant has the ability to carry on its business or proposed business in a prudent manner; and

• (c) the applicant has the ability to comply with subpart 2 and the regulations; and

• (d) in the case of an applicant who carries on, or proposes to carry on, business as a life insurer, the applicant has the ability to comply with subpart 3 and the regulations; and

• (e) the applicant has the ability to comply with the proposed conditions of licence (if any); and

• (f) the applicant holds and has the ability to maintain a minimum amount of capital that is specified in an applicable solvency standard; and

• (g) the applicant has complied with section 18(1)(a) and (b) and the fit and proper policy that is provided is satisfactory; and

• (h) the applicant has complied with section 18(1)(c) and the risk management programme that is provided is satisfactory; and

• (i) the applicant's incorporation and ownership structure, ownership, governance structure, and financial strength are appropriate, having regard to the size and nature of the applicant's business or proposed business, including—

  • (i) the size and type of insurance business that is, or is proposed to be, carried out; and

  • (ii) the size and type of risks that are, or are proposed to be, insured; and

• (j) in the case of an applicant that is an overseas person,—

  • (i) the law and regulatory requirements of the applicant's home jurisdiction that apply to the applicant and relate to the matters specified in subsection (3) are appropriate, having regard to whether that law and those requirements are, in terms of achieving the purposes of this Act, at least as satisfactory as the law and regulatory requirements of New Zealand that relate to those matters and apply to insurers incorporated in New Zealand; and

  • (ii) the nature and extent of prudential supervision that applies to the applicant and to insurers generally in the applicant's home jurisdiction are appropriate, having regard to whether the prudential supervision is, in terms of achieving the purposes of this Act, at least as satisfactory as the nature and extent of prudential supervision that applies to insurers incorporated in New Zealand; and

• (k) the applicant—

  • (i) is registered under the Financial Service Providers (Registration and Dispute Resolution) Act 2008; or

  • (ii) complies with section 13(a) of that Act; and

• (l) the applicant has the ability to comply with the Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (if the applicant is, or will be, a reporting entity under that Act); and

• (m) the applicant complies with any other prescribed requirements.

(2) For the purposes of subsection (1)(c) and (d), the Bank must, in the case of an applicant that is an overseas person, have regard to any overseas policyholder preference.

(3) For the purposes of subsection (1)(j)(i), the matters are—

• (a) the licensing, registration, or authorisation of insurers; and

• (b) the supervision of insurers; and

• (c) solvency and capital standards that apply to insurers; and

• (d) financial reporting, accounting, and auditing standards; and

• (e) corporate governance standards; and

• (f) matters concerning insurers that are insolvent or otherwise in serious financial difficulties; and

• (g) the disqualification of persons to be or to act as directors or relevant officers of an insurer.

(4) The law and regulatory requirements referred to in subsection (1)(j)(i), and the nature and extent of the prudential supervision referred to in subsection (1)(j)(ii), must be treated as being appropriate for the purposes of those provisions if the applicant's home jurisdiction is a prescribed jurisdiction for the purposes of this subsection.

(5) If an applicant is not required under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 to be registered under that Act, the applicant is still required to comply with section 13(a) of that Act for the purposes of subsection (1)(k).

(1) Subsection (2) applies when the Bank is—

• (a) considering, for the purposes of section 19(1)(b), the ability of an applicant to carry on its business or proposed business in a prudent manner; or

• (b) considering what conditions should be imposed under section 21 relating to the applicant carrying on its business or proposed business in a prudent manner; or

• (c) considering whether a licensed insurer is carrying on its business in a prudent manner.

(2) The Bank must confine its consideration to the following matters:

• (a) financial and human resources in relation to the size and nature of the business or proposed business:

• (b) internal controls or proposed internal controls:

• (c) the size and type of insurance risk that is, or is proposed to be, carried by the applicant or insurer:

• (d) reinsurance arrangements that have been, or are proposed to be, entered into:

• (e) the extent to which the business or proposed business involves activities that are not insurance business and the nature of those activities (and, in particular, whether those activities may be prejudicial to the solvency of the applicant or insurer or its ability to comply with this Act or the regulations):

• (f) the nature and extent of transactions that the applicant or insurer has with, or in respect of, related parties (for example, loans to, or from, a related party or guarantees in respect of a related party's debts):

• (g) any other prescribed matters.

(1) A body corporate may be licensed as a licensed insurer unconditionally or subject to any conditions that the Bank may impose under subsection (2).

(2) A licence may be subject to any of the following conditions:

• (a) conditions that relate to any of the matters referred to in section 20 (which relates to carrying on business in a prudent manner), including any matters prescribed by regulations made for the purposes of section 20(2)(g):

• (b) conditions that require a licensed insurer to maintain a solvency margin in accordance with an applicable solvency standard (including requiring the insurer to maintain a minimum amount of capital in accordance with the standard):

• (c) conditions that require a life insurer to maintain solvency margins in respect of the statutory funds of the insurer in accordance with an applicable solvency standard (including requiring the insurer to maintain a minimum amount of capital in accordance with the standard):

• (d) a condition that requires a specified amount or proportion of the licensed insurer's insurance business to relate to New Zealand policyholders (whether that amount or proportion is defined in terms of premium revenue, amount of insurance liability, a combination of premium revenue and amount of insurance liability, or in any other way):

• (e) in the case of a licensed insurer that has not yet commenced carrying on insurance business in New Zealand, either or both of the following:

  • (i) a condition that specifies the time period within which the insurer must commence carrying on insurance business in New Zealand:

  • (ii) a condition that specifies an amount of insurance business in New Zealand that the insurer must have within a specified period (whether that amount is defined in terms of premium revenue, amount of insurance liability, a combination of premium revenue and amount of insurance liability, or in any other way):

• (f) a condition that requires the licensed insurer or the directors of the insurer (or both) to certify that any conditions have been complied with (being certification that is given at the time or times and in the manner specified in the condition):

• (g) a condition that requires a certificate given under paragraph (f) to be verified by the appointed actuary or another person specified in the condition (being verification that is given at the time or times and in the manner specified in the condition):

• (h) any other prescribed conditions or conditions that relate to prescribed matters.

(3) Subsection (2)(c) does not limit subsection (2)(b).

(4) A condition under subsection (2)(b) or (c) may—

• (a) specify the amount of the solvency margin; or

• (b) set the level of the solvency margin by means of a ratio, percentage of another amount, or in any other way.

(1) The Bank may, at any time after a licence is issued, by notice in writing to the licensed insurer,—

• (a) impose conditions of licence (whether or not the licence is already subject to conditions); or

• (b) vary, remove, add to, or substitute any conditions of licence.

(2) Section 21(2) to (4) apply for the purposes of subsection (1) with all necessary modifications.

(3) The Bank must not exercise a power referred to in subsection (1) unless—

• (a) the Bank gives the licensed insurer not less than 7 days' notice in writing of the Bank's intention to do so; and

• (b) the notice contains, or is accompanied by, a statement of the Bank's reasons; and

• (c) the licensed insurer has a reasonable opportunity to make submissions to the Bank; and

• (d) the Bank has regard to those submissions.

A licensed insurer commits an offence if it fails to comply with a condition of its licence and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) If a licensed insurer has reasonable grounds to believe that a failure to maintain a solvency margin is likely to occur at any time within the next 3 years, the insurer must report the likely failure to the Bank as soon as is reasonably practicable.

(2) A licensed insurer that fails to comply with subsection (1) commits an offence and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) The Bank must, after it has made a decision on an application for a licence, give written notice of the decision to the applicant.

(2) If the Bank refuses to issue a licence, the notice must contain, or be accompanied by, a statement of the Bank's reasons for the refusal.

(3) The Bank must give notice of the issue of a licence on the Bank's Internet site.

(1) Subsection (2) applies if, as a result of a proposed transaction, a person (person A)—

• (a) would become a holding entity of a licensed insurer; or

• (b) would obtain control of a licensed insurer.

(2) Person A must, before the proposed transaction takes effect, notify the Bank of the proposed transaction and include in its notification an explanation as to how this subsection applies to the person.

(3) Subsection (2)—

• (a) applies regardless of whether person A is a party to the proposed transaction; but

• (b) does not apply to person A if—

  • (i) person A does not know of the proposed transaction before it takes effect; or

  • (ii) a specified person notifies the Bank of the proposed transaction under subsection (2).

(4) In this section and sections 28 and 30,—

• (a) proposed transaction means a transaction or an arrangement that is proposed to take effect after the licence is issued to the licensed insurer referred to in subsection (1):

• (b) person A has control of an insurer if person A—

  • (i) has the power, directly or indirectly, to exercise, or control the exercise of, 50% or more of the voting rights in the insurer; or

  • (ii) has, together with 1 or more specified persons, the power, directly or indirectly, to exercise, or control the exercise of, 50% or more of the voting rights in the insurer:

• (c) specified person, in relation to person A, means—

  • (i) a person who is acting or will act jointly or in concert with person A in respect of exercising, or controlling the exercise of, the voting rights in the licensed insurer referred to in subsection (1); or

  • (ii) a person who acts, or is accustomed to act, in accordance with the wishes of person A.

If a licensed insurer intends or proposes to change its corporate form (for example, as a result of demutualisation), the insurer must notify the Bank of that matter before the change takes place.

(1) The Bank must, after being notified under section 26 or 27, consider whether, if the proposed transaction takes effect or the corporate form is changed, the Bank would still be satisfied of the matters in section 19(1)(a) to (m) (which are the matters that the Bank must be satisfied of before an applicant is entitled to be issued with a licence).

(2) Each of the following persons must, within the time and in the manner specified by the Bank, provide to the Bank the information that is required by the Bank to assist it in acting under subsection (1):

• (a) in the case of section 26, the person that notified the Bank and the licensed insurer:

• (b) in the case of section 27, the licensed insurer.

(3) The Bank must, within 20 working days after receiving under subsection (2) all of the information that is reasonably required by the Bank to assist it in acting under subsection (1), give written notice of its decision under that subsection together with a statement of the Bank's reasons to,—

• (a) in the case of section 26, the person that notified the Bank and the licensed insurer:

• (b) in the case of section 27, the licensed insurer.

A licensed insurer or other person that fails to comply with section 26, 27, or 28(2) commits an offence and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) The Bank may cancel a licence if the Bank is satisfied that—

• (a) 1 or more of the following applies:

  • (i) the licensed insurer has asked the Bank, by written notice, to cancel its licence:

  • (ii) the licensed insurer has ceased to carry on insurance business in New Zealand:

  • (iii) the licensed insurer has breached a condition of the licence that requires it to commence carrying on insurance business in New Zealand:

  • (iv) there has been a failure to comply with section 26, 27, or 28(2) in respect of the licensed insurer (whether the failure is by a person referred to in section 26(2) or the insurer):

  • (v) the Bank has given a notice under section 28(3) that, if a proposed transaction takes effect or the corporate form is changed, it would no longer be satisfied of 1 or more of the matters in section 19(1)(a) to (m), and (whether before or after that notice is given) the proposed transaction takes effect or the corporate form is changed:

  • (vi) the licensed insurer has been deregistered under section 18 of the Financial Service Providers (Registration and Dispute Resolution) Act 2008 and has not been reregistered under that Act (whether under section 22 of that Act or otherwise) within the 3-month period from the date of deregistration:

  • (vii) the licensed insurer is a company that has been removed from the New Zealand register (within the meaning of the Companies Act 1993):

  • (viii) the licensed insurer is an overseas company that has been removed from the overseas register (within the meaning of the Companies Act 1993):

  • (ix) the licensed insurer has been liquidated, wound up, or dissolved or has otherwise ceased to exist; and

• (b) the licensed insurer has no liabilities under any contracts of insurance in respect of insurance business carried on by it in New Zealand.

(2) The Bank must not, in the case of subsection (1)(a)(i) to (vi), cancel a licence unless—

• (a) the Bank sends notice of the Bank's intention to cancel the licence to the insurer; and

• (b) the notice contains, or is accompanied by, a statement of the Bank's reasons; and

• (c) the notice specifies the date by which an objection to the cancellation must be delivered to the Bank (which must be not less than 20 working days after the date of the notice); and

• (d) the Bank has regard to any objections that are received before the close of the date specified under paragraph (c).

(3) The Bank must, as soon as practicable after cancelling a licence, give—

• (a) public notice of the cancellation; and

• (b) in the case of a cancellation under subsection (1)(a)(i) to (vi), written notice of the cancellation to the insurer.

(4) In this section, public notice means that the notice is published—

• (a) in 1 or more daily newspapers circulating in each of the cities of Auckland, Hamilton, Wellington, Christchurch, and Dunedin; and

• (b) on the Bank's Internet site.

(1) If the Bank considers that it would, under section 30, cancel a licence if the licensed insurer had no liabilities under any contracts of insurance in respect of insurance business carried on by it in New Zealand, the Bank may direct the insurer to arrange, subject to the Bank’s approval under section 32, to assign its liabilities to 1 or more other licensed insurers.

(2) The licensed insurer must—

• (a) effect the assignment of the liabilities within the period specified in the direction; and

• (b) comply with any conditions relating to the assignment that are specified by the Bank in the direction; and

• (c) comply with section 32(4).

(3) Subsections (1) and (2) have effect despite section 44(1) (which relates to transfers and amalgamations with the Bank's approval).

(4) The licensed insurer may, in connection with an assignment under this section, assign any rights or benefits in connection with contracts of insurance in respect of the insurance business carried on in New Zealand by the insurer (subject to any conditions specified by the Bank in the direction).

(5) A licensed insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) A licensed insurer must not assign its liabilities under section 31, and a purported assignment under that section is of no effect, unless the assignment is approved by the Bank under subsection (2).

(2) The Bank may only approve a proposed assignment of an insurer’s liabilities under section 31 if the Bank is satisfied that the assignment is appropriate, having regard to—

• (a) the interests of the insurer’s policyholders; and

• (b) the interests of the policyholders of the licensed insurer or insurers to whom the liabilities are to be assigned; and

• (c) any other matter the Bank considers relevant.

(3) The approval must be in writing and may be made subject to specified conditions.

(4) If the Bank approves an assignment, the insurer must—

• (a) comply with the conditions of the approval; and

• (b) give reasonable notice (in writing) of the assignment to the insurer’s policyholders; and

• (c) give the Bank such written evidence of the assignment as the Bank reasonably requires.

If a licensed insurer (the first insurer) accepts an assignment of liabilities from another licensed insurer (the second insurer) that is approved by the Bank under section 32, the following are taken to have occurred:

• (a) contracts of insurance in respect of which liability is accepted by the first insurer (the transferring contracts) are to be treated for all purposes as if each contract had been transferred by novation from the second insurer to the first insurer:

• (b) a policyholder under a transferring contract is taken to have the same rights against the first insurer as the policyholder would have against that insurer had the person’s contract of insurance been transferred by novation to the first insurer:

• (c) the rights of the first insurer against policyholders under transferring contracts are the same as they would be had the transferring contracts been transferred by novation to the first insurer from the second insurer.

(1) Every licensed insurer must—

• (a) be subject to a written policy that governs the qualifications, requirements, and other criteria that a person must have or satisfy in order to be appointed, and to continue to hold a position, as a director or relevant officer of the insurer, being a policy for the purpose of ensuring that only fit and proper persons are appointed to, and continue to hold, those positions (a fit and proper policy); and

• (b) take all practicable steps to comply with that policy.

(2) The fit and proper policy must clearly specify the qualifications, requirements, and other criteria for a particular position, including matters relating to a person's character, competence, and experience relative to the duties of the position.

(3) The qualifications, requirements, and other criteria for a particular position that are specified in the fit and proper policy must, in the manner specified in an applicable fit and proper standard, take into account the fit and proper matters specified in the fit and proper standard.

(4) The fit and proper policy must—

• (a) comply with the prescribed requirements; and

• (b) contain adequate provisions—

  • (i) to encourage any person to disclose information to the insurer or the Bank that may be relevant to a fit and proper assessment; and

  • (ii) for giving or obtaining any consents required for the collection and use of any information by the insurer to comply with the policy or section 37 and by the Bank for its powers and functions under this Act in connection with the policy.

(5) A licensed insurer must obtain the Bank's approval before its fit and proper policy is amended in a material way.

(6) A licensed insurer that fails to comply with this section commits an offence and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) If the licensed insurer is part of a group of insurers, the fit and proper policy that the insurer is required to be subject to may, at the option of the insurer, be a fit and proper policy that applies to the insurer and 1 or more other members of that group (a group policy).

(2) However, if the group policy does not comply with the requirements of section 34(1) to (4) in any respect, the licensed insurer must prepare a supplementary document that, when taken together with the group policy, ensures that the requirements of section 34(1) to (4) are complied with (in which case the insurer's fit and proper policy must be taken to be the group policy together with the supplementary document).

(1) The Bank may, by a notice signed by the Governor, issue fit and proper standards for the purposes of section 34(3) that—

• (a) specify matters that are relevant to the consideration of whether a person is a fit and proper person to be appointed to, and continue to hold, a position as a director or relevant officer; and

• (b) specify the manner in which those matters must be taken into account in respect of a fit and proper policy.

(2) A fit and proper standard may be expressed to apply in relation to—

• (a) all licensed insurers or applicants; or

• (b) a specified class or classes of licensed insurers or applicants; or

• (c) 1 or more specified licensed insurers or applicants.

(3) A fit and proper standard may—

• (a) have general or specific application:

• (b) differ according to differences in time or circumstance.

(4) This section is subject to sections 233 to 236 (which provide for general provisions relating to standards).

(1) A licensed insurer must, no later than 20 working days after the appointment of a new director or relevant officer, provide to the Bank a certificate that complies with subsection (4) in respect of the new director or relevant officer.

(2) In addition, if the Bank has given a notice in writing to a licensed insurer that requires the insurer to provide to the Bank a certificate that complies with subsection (4) in respect of a specified director or relevant officer, the insurer must, within the time specified in the notice, comply with the requirement.

(3) Subsection (2) applies whether or not a certificate in respect of the director or officer has previously been provided under this section.

(4) The certificate must—

• (a) specify the director's or relevant officer's full name, previous names (if any), and residential address; and

• (b) in the case of subsection (1), specify the date of the appointment and the director's or relevant officer's date of birth; and

• (c) state that, in the opinion of all directors of the licensed insurer after due inquiry by them, the director or relevant officer is, in accordance with its fit and proper policy, a fit and proper person to hold the relevant position; and

• (d) contain, or be accompanied by, a certificate signed by the director or relevant officer that states that, in his or her opinion, he or she is, in accordance with the licensed insurer's fit and proper policy, a fit and proper person to hold the relevant position; and

• (e) contain, or be accompanied by, a summary of information that is relevant to the consideration of whether the person satisfies the licensed insurer's fit and proper policy; and

• (f) be signed on behalf of all the directors of the licensed insurer by at least 2 directors of the insurer (or, if the insurer has only 1 director, by that director); and

• (g) be in the prescribed form (if any).

(5) Every licensed insurer that is required to provide a certificate to the Bank under this section must provide to the Bank any further information that is required by the Bank to assist it in considering whether the director or relevant officer is a fit and proper person to hold the relevant position.

(6) A licensed insurer commits an offence if the insurer fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) The Bank may, by notice to an overseas insurer, exempt the insurer from compliance with section 37(1) to the extent that it relates to the directors of the insurer.

(2) The Bank must, before granting an exemption, be satisfied that the law or regulatory requirements of the home jurisdiction of the insurer—

• (a) provide for the assessment by an overseas supervisor of whether the persons who are appointed as directors of the insurer are fit and proper persons to be appointed to that position; and

• (b) provide for the removal of a person from being a director of the insurer if the overseas supervisor considers that the person is not a fit and proper person to hold the relevant position.

(3) The matters in subsection (2) must be treated as being satisfied in respect of an overseas insurer that is incorporated in a jurisdiction that is prescribed for the purposes of this subsection.

(4) This section is subject to section 232 (which provides for general provisions relating to exemptions).

(1) This section applies if the Bank, after having regard to the fit and proper matters specified in an applicable fit and proper standard, has reasonable grounds to believe that a director or relevant officer of a licensed insurer is not a fit and proper person to hold the relevant position.

(2) If this section applies, the Bank may remove the director or relevant officer from the relevant position from a date specified by the Bank.

(3) If the Bank acts under subsection (2), the Bank may give a direction that the director or relevant officer may not be reappointed as a director or relevant officer of the licensed insurer—

• (a) at any time; or

• (b) for a period specified by the Bank; or

• (c) until 1 or more things specified by the Bank occur (for example, the director or relevant officer receives a specified qualification).

(4) This section may apply regardless of whether or not the director or relevant officer is, in accordance with the licensed insurer's fit and proper policy, a fit and proper person to hold his or her position.

(5) This section does not apply in respect of a director of an overseas insurer.

(6) This section has effect despite any contract, employment agreement, enactment, or rule of law, or the terms of the constitution of a licensed insurer.

(1) The Bank must not exercise a power referred to in section 39 unless—

• (a) the Bank gives the licensed insurer and the director or relevant officer not less than 7 days' notice in writing of the Bank's intention to do so; and

• (b) the notice contains, or is accompanied by, a statement of the Bank's reasons; and

• (c) the licensed insurer and the director or relevant officer each have a reasonable opportunity to make submissions to the Bank; and

• (d) the Bank has regard to those submissions.

(2) The Bank must exercise the powers conferred by section 39 by giving notice in writing to—

• (a) the licensed insurer; and

• (b) the director or the relevant officer; and

• (c) in the case of a director, the Registrar of Companies.

(3) A notice given under subsection (2)(c) is sufficient compliance with section 159 of the Companies Act 1993.

(4) A notice given under this section may be amended, revoked, or replaced in the same way as it may be given.

(1) If a person has been removed from a particular position under section 39, the person may not accept reappointment to the position in breach of a direction given under section 39(3).

(2) A person commits an offence if the person fails to comply with subsection (1) and is liable, on summary conviction, to imprisonment for a term not exceeding 3 months or to a fine not exceeding $200,000 (or both).

(1) A director or relevant officer or former director or relevant officer who is the subject of a decision of the Bank under section 39 may appeal to the High Court against the decision.

(2) An appeal is by way of rehearing.

(3) A decision against which an appeal is lodged continues in force pending the determination of the appeal unless the High Court orders otherwise.

(1) Any party to an appeal under section 42 who is dissatisfied with any determination of the High Court in the proceedings as being erroneous in point of law may, with the leave of the High Court or, if the High Court refuses leave, with the leave of the Court of Appeal, appeal to the Court of Appeal against the determination; and section 66 of the Judicature Act 1908 applies to any such appeal.

(2) In determining whether to grant leave to appeal, the Court of Appeal must have regard to whether the question of law involved in the appeal is one that, by reason of its general or public importance or for any other reason, ought to be submitted to the Court of Appeal for its decision.

(3) The Court of Appeal, in granting leave, may impose the conditions that it thinks fit, whether as to costs or otherwise.

(4) The decision of the Court of Appeal on any application for leave to appeal, or on an appeal under this section, is final.

(1) A licensed insurer must obtain the written approval of the Bank before—

• (a) giving effect to a transaction that involves,—

  • (i) in the case of an overseas insurer, the transfer of all or part of the insurer's New Zealand insurance business to another person; or

  • (ii) in the case of any other insurer, the transfer of all or part of the insurer's insurance business to another person; or

• (b) the insurer amalgamates with another person (whether it occurs under Part 13 of the Companies Act 1993 or any other law of similar effect that results in 2 or more entities amalgamating and continuing as 1 entity).

(2) For the purposes of sections 45 to 53,—

(3) A licensed insurer commits an offence if—

• (a) the insurer fails to comply with subsection (1); or

• (b) in the case of the Bank refusing to give its approval under subsection (1), the insurer takes any further steps after the refusal under the Companies Act 1993 or any other enactment to give effect to the proposed transfer or amalgamation.

(4) Every licensed insurer that commits an offence under subsection (3) is liable, on summary conviction, to a fine not exceeding $1,000,000.

(5) This section does not apply in respect of a transfer or amalgamation under section 31, sections 164 to 167, subpart 4 of Part 4, or section 207(5).

(1) A request for the Bank to give its approval under section 44 must be—

• (a) made in the manner that is specified by the Bank; and

• (b) accompanied by payment of the prescribed fee for the request (if any). 

(2) A joint request may be made by 2 or more licensed insurers that are parties to the proposed transfer or amalgamation.

(3) A licensed insurer that makes a request and every other party to the proposed transfer or amalgamation must provide to the Bank the information that is required by the Bank to assist it in determining whether to give its approval.

(1) The Bank may arrange for an independent actuary or any other suitably qualified person to make a written report on a proposed transfer or amalgamation.

(2) A licensed insurer that makes a request and every other party to the proposed transfer or amalgamation must provide to the actuary or other person referred to in subsection (1) the information that is required by the actuary or person to assist him or her in preparing the report.

(1) A licensed insurer that makes a request under section 45 is liable to pay to the Bank the reasonable costs incurred by the Bank in obtaining the report or reports under section 46 (and in the case of a joint application, the licensed insurers are jointly and severally liable to pay those costs).

(2) An amount payable under subsection (1) is recoverable as a debt due to the Bank in any court of competent jurisdiction.

In considering a request made under section 45, the Bank must have regard to the following matters:

• (a) the ability of the transferee, or the amalgamated entity, to comply with subpart 2 and, if applicable, subpart 3:

• (b) the interests of the policyholders of the insurers that are parties to the proposed transfer or amalgamation:

• (c) any other matter the Bank considers relevant.

(1) The Bank may, after considering a request made under section 45, by notice in writing to the licensed insurer or insurers,—

• (a) give its approval unconditionally or subject to any conditions that the Bank may impose under subsection (3); or

• (b) refuse to give its approval.

(2) The Bank must give the notice under subsection (1) within 20 working days after receiving both of the following:

• (a) all of the information under section 45(3) that is reasonably required by the Bank to assist it in determining whether to give its approval:

• (b) all reports that the Bank has arranged to receive under section 46 in respect of the proposed transfer or amalgamation.

(3) The approval may be subject to any of the following conditions:

• (a) conditions that relate to any of the matters referred to in section 20 (which relates to carrying on business in a prudent manner), including any matters prescribed by regulations made for the purposes of section 20(2)(g):

• (b) a condition that requires a specified amount or proportion of the transferee's or amalgamated entity's insurance business to relate to New Zealand policyholders (whether that amount or proportion is defined in terms of premium revenue, amount of insurance liability, a combination of premium revenue and amount of insurance liability, or in any other way):

• (c) a condition that requires a licensed insurer or the directors of a licensed insurer (or both) to certify that any conditions have been complied with (being certification that is given at the time or times and in the manner specified in the condition):

• (d) any other prescribed conditions or conditions that relate to prescribed matters.

(4) If the Bank refuses to give its approval, it must give a notice to the licensed insurer or insurers that contains a statement of its reasons.

A licensed insurer commits an offence if it fails to comply with a condition of the approval imposed under section 49 and is liable, on summary conviction, to a fine not exceeding $500,000.

Sections 44 to 50 do not limit any other enactment that must be complied with in order to give effect to a proposed transfer or amalgamation that requires approval under section 44 (for example, in the case of amalgamating companies, the requirements of Part 13 of the Companies Act 1993).

Nothing in sections 44 to 51 invalidates any transfer or amalgamation made without the written approval of the Bank.

(1) If the Bank approves a transfer under section 44 and, for the purposes of the transfer, a licensed insurer (the first insurer) accepts an assignment of liabilities from another licensed insurer (the second insurer), the following are taken to have occurred:

• (a) contracts of insurance in respect of which liability is accepted by the first insurer (the transferring contracts) are to be treated for all purposes as if each contract had been transferred by novation from the second insurer to the first insurer:

• (b) a policyholder under a transferring contract is taken to have the same rights against the first insurer as the policyholder would have against that insurer had the person’s contract of insurance been transferred by novation to the first insurer:

• (c) the rights of the first insurer against policyholders under transferring contracts are the same as they would be had the transferring contracts been transferred by novation to the first insurer from the second insurer.

(2) An agreement between the first insurer and the second insurer may, with the Bank's approval, allocate liabilities in respect of the transferring contracts (and that agreement is binding on the first insurer, the second insurer, and the policyholders under those contracts).

(3) Subsection (1) is subject to subsection (2).

The Bank must publish its policies in relation to how it acts, or proposes to act,—

• (a) in determining applications for licences; and

• (b) in imposing, varying, removing, or adding to conditions of licences; and

• (c) in determining requests for approvals under section 45.

(1) The Bank may, by a notice signed by the Governor, issue solvency standards for the purposes of this Act.

(2) A solvency standard may be expressed to apply in relation to—

• (a) all licensed insurers or applicants; or

• (b) a specified class or classes of licensed insurers or applicants; or

• (c) 1 or more specified licensed insurers or applicants.

(3) A solvency standard may—

• (a) have general or specific application:

• (b) differ according to differences in time or circumstance.

(4) The Bank must, before issuing a solvency standard, have regard to relevant overseas standards for the purpose of ensuring that the solvency standard to be issued by the Bank (the proposed standard) does not apply, in respect of a particular insurer, in an unreasonable manner (as compared to other insurers) as a result of the insurer being incorporated in New Zealand or some other jurisdiction.

(5) In subsection (4), relevant overseas standards means standards relating to solvency or capital that—

• (a) relate to matters that are the same as, or similar to, those that are covered by the proposed solvency standard; and

• (b) apply to insurers in the home jurisdictions of the overseas insurers to which the proposed solvency standard will apply.

(6) This section is subject to sections 233 to 236 (which provide for general provisions relating to standards).

A solvency standard may prescribe 1 or more of the following matters:

• (a) for the purposes of sections 19(1)(f) and 21(2)(b) and (c),—

  • (i) the minimum amount of capital that an insurer must hold and maintain:

  • (ii) the methods for determining or calculating the amount of capital that an insurer must hold and maintain (whether by reference to a specified formula, framework, or amount, a combination of specified formulae, frameworks, or amounts, or otherwise):

• (b) the methods for determining or calculating a solvency margin for the purposes of a condition of a licence (whether by reference to a specified formula, framework, or amount, a combination of specified formulae, frameworks, or amounts, or otherwise):

• (c) the methods for determining whether, and the extent to which, a solvency margin is being maintained:

• (d) requirements relating to reports about the financial condition of a licensed insurer and other reports relating to the solvency of the licensed insurer (including requirements relating to the information that must be contained in the reports, who must prepare the reports, how often the reports must be prepared, other matters concerning the preparation of reports, to whom the reports must be provided, and when the reports must be provided):

• (e) for the purposes of any of paragraphs (a) to (d),—

  • (i) the methods for estimating or valuing the assets or liabilities (or both) of an insurer:

  • (ii) the assets of an insurer that must be disregarded (in whole or in part) for the purposes of estimating or valuing the assets of an insurer:

• (f) for the purposes of any of paragraphs (a) to (d), any other matters relating to the assessment, or disclosure, of—

  • (i) whether, and the extent to which, the value of an insurer's assets exceeds the value of its liabilities (including contingent liabilities); or

  • (ii) whether an insurer is able to pay its liabilities as they become due in the normal course of business; or

  • (iii) other matters relating to the financial condition or solvency of an insurer:

• (g) requirements relating to the disclosure of information relating to the financial condition or solvency of a licensed insurer to 1 or more of the following (including prescribing to whom and when disclosure must be made and the manner of disclosure):

  • (i) the Bank:

  • (ii) the insurer's policyholders or any class of those policyholders:

  • (iii) the public or any class of the public:

• (h) matters relating to the manner in which a review of actuarial information under section 77 is to be carried out (including specifying information as being actuarial information for the purposes of that section).

A licensed insurer commits an offence if it fails to comply with any of the requirements of a solvency standard under section 56(d) or (g) that apply to the insurer and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) The following written material may be incorporated by reference in a solvency standard:

• (a) standards, requirements, or recommended practices of international or national organisations:

• (b) standards, requirements, or recommended practices prescribed in any country or jurisdiction:

• (c) any other written material that deals with technical matters and is too large or impractical to include in, or print as part of, the solvency standard.

(2) Schedule 1 applies to any material incorporated by reference in a solvency standard.

(1) The Bank may, by notice to an overseas insurer, exempt the insurer from compliance with a solvency standard or a part of a solvency standard.

(2) The Bank must, before granting an exemption, be satisfied that—

• (a) the overseas insurer is required, under the law or regulatory requirements of the home jurisdiction of the insurer, to comply with standards or requirements that relate to the same or similar matters that are covered by the solvency standard or the part of a solvency standard to which the exemption relates (the overseas standards or requirements); and

• (b) the overseas standards or requirements—

  • (i) cover the New Zealand business of the overseas insurer; and

  • (ii) are, in terms of achieving the purposes of this Act, at least as satisfactory as the solvency standard or the part of a solvency standard to which the exemption relates; and

• (c) the nature and extent of prudential supervision that applies to the overseas insurer in respect of the overseas standards or requirements is, in terms of achieving the purposes of this Act, at least as satisfactory as the nature and extent of prudential supervision that applies to insurers incorporated in New Zealand in respect of the solvency standard or the part of a solvency standard to which the exemption relates.

(3) This section is subject to section 232 (which provides for general provisions relating to exemptions).

(1) A licensed insurer must have a current financial strength rating that is given by an approved rating agency.

(2) Subsection (1) does not apply to—

• (a) a licensed insurer that is included in a class of insurers that is the subject of an exemption under section 238(1)(a)(ii); or

• (b) a licensed insurer if the only kind of insurance business carried on by the insurer in New Zealand is reinsurance business; or

• (c) a captive insurer.

(3) Sections 63 to 71 do not apply to—

• (a) a reinsurer in respect of its reinsurance business; or

• (b) a captive insurer.

(4) A licensed insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $1,000,000.

(1) If an overseas policyholder preference may apply in respect of a licensed insurer that is an overseas insurer, the financial strength rating of the insurer must, in the prescribed circumstances and in the prescribed manner, contain, or be accompanied by, a reference to the overseas policyholder preference when the financial strength rating is disclosed under any of sections 64 and 67 to 69.

(2) If subsection (1) is not complied with, the licensed insurer must be treated as having failed to comply with section 64, 67, 68, or 69 (as the case may be).

(1) The Bank may approve a person as a rating agency for the purposes of this Act.

(2) In deciding whether to approve a person as a rating agency, the Bank must have regard to the following:

• (a) the independence of the rating agency:

• (b) the adequacy of resources available to the rating agency:

• (c) the credibility and objectivity of the rating agency's methodology:

• (d) the consistency and comparability of the rating agency's ratings when assessed against ratings industry practice:

• (e) the adequacy of the rating agency's disclosure of information, including information about its processes, experience, and ownership:

• (f) relevant international standards, codes, and recommended practices relating to the ratings industry.

(3) The Bank may, at any time, review the approval of a person as a rating agency, and in conducting the review the Bank must have regard to the matters in subsection (2).

(4) If, after conducting the review, the Bank considers that the person should no longer be an approved rating agency, it may revoke the approval.

(5) A financial strength rating given to an insurer by an agency at a time when the agency was an approved rating agency does not cease to be a rating from an approved rating agency for the purposes of this Act by reason of the fact that the approval of that agency has expired or has been revoked.

(6) The Bank must publish and keep up to date a list of approved rating agencies on the Bank's Internet site at all reasonable times.

(1) A licensed insurer must, within 20 working days after receiving notice in writing that its financial strength rating has changed, deliver to the Bank a certificate by the approved rating agency of the new rating that also states the date on which it was given.

(2) A licensed insurer must, within 20 working days after receiving notice in writing that a credit watch warning has been given by an approved rating agency in respect of the insurer's financial strength rating, deliver to the Bank a certificate by the approved rating agency of the credit watch warning that also states the date on which it was given and the reasons for it.

(3) In this section, credit watch warning means any word, expression, or symbol used by an agency to indicate that the agency has an insurer under consideration with a view to a possible downgrading in a financial strength rating given to the insurer by the agency.

(1) A licensed insurer that is required to comply with section 60(1) or that otherwise has a current financial strength rating given by an approved rating agency must, before entering into or renewing a contract of insurance with a New Zealand policyholder, disclose in writing to the policyholder—

• (a) the insurer's current financial strength rating; and

• (b) the name of the agency by which the rating was given; and

• (c) the rating scale of which the rating referred to in paragraph (a) forms part.

(2) If an insurance intermediary, in arranging a contract of insurance or the renewal of a contract of insurance, discloses to the policyholder in writing and before the contract is entered into or renewed the matters referred to in subsection (1) in relation to the proposed insurer, the insurer must be treated as having complied with that subsection.

(3) If it is not reasonably practicable for a licensed insurer or insurance intermediary, as the case may be, to disclose the matters referred to in subsection (1) in writing and before the contract is entered into or renewed, that subsection must be treated as having been complied with if—

• (a) those matters (other than the rating scale) are disclosed to the policyholder orally before the contract is entered into or renewed; and

• (b) those matters are disclosed to the policyholder in writing as soon as it becomes practicable to do so.

(4) For the purposes of this section, a matter is not to be taken as having been disclosed unless it is disclosed clearly and prominently.

(5) A licensed insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $100,000.

(1) A licensed insurer that does not have a current financial strength rating as a result of section 60(2)(a) must, before entering into a contract of insurance or renewing a contract of insurance with a New Zealand policyholder, disclose in writing to the policyholder—

• (a) that the insurer is not required to have a current financial strength rating; and

• (b) the reason why it is not required to have a current financial strength rating.

(2) If an insurance intermediary, in arranging a contract of insurance or the renewal of a contract of insurance, discloses to the policyholder in writing and before the contract is entered into or renewed the matters referred to in subsection (1) in relation to the proposed insurer, the insurer must be treated as having complied with that subsection.

(3) If it is not reasonably practicable for a licensed insurer or insurance intermediary, as the case may be, to disclose the matters referred to in subsection (1) in writing and before the contract is entered into or renewed, that subsection must be treated as having been complied with if those matters are disclosed to the policyholder—

• (a) orally before the contract is entered into or renewed; and

• (b) in writing as soon as it becomes practicable to do so.

(4) For the purposes of this section, a matter is not to be taken as having been disclosed unless it is disclosed clearly and prominently.

(5) A licensed insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $100,000.

(1) If a contract of insurance is entered into or renewed, as the case may be, and section 64 or 65 (as the case may be) has not been complied with, the New Zealand policyholder may, within 20 working days after the contract is entered into or renewed, cancel the contract by notice in writing to the insurer.

(2) If a contract of insurance is cancelled under subsection (1), the New Zealand policyholder ceases to be liable for the payment of any premiums relating to the period commencing on the date on which the contract is cancelled and ending on the date on which the contract would have terminated, and any premiums paid by the policyholder to the insurer or any insurance intermediary that relate to that period must be repaid to the policyholder by the insurer.

(1) If an Internet site that is maintained by, or on behalf of, a specified licensed insurer contains information or advertising about the insurer's insurance products, the insurer must ensure that the Internet site—

• (a) states clearly and prominently—

  • (i) the insurer's current financial strength rating; and

  • (ii) the name of the agency by which the rating was given; and

  • (iii) the rating scale of which the rating referred to in subparagraph (i) forms part; or

• (b) contains a prominent link to another Internet site that clearly and prominently states the matters specified in paragraph (a).

(2) In this section, a specified licensed insurer means a licensed insurer that is required to comply with section 60(1) or that otherwise has a current financial strength rating given by an approved rating agency.

(1) No advertisement that refers to the current financial strength rating, or to any part of the rating, of a licensed insurer may be distributed unless the advertisement also states clearly and prominently—

• (a) the rating; and

• (b) the name of the agency by which the rating was given; and

• (c) that any scale of which the rating forms part is available for inspection at every office in New Zealand of the insurer.

(2) For the purposes of this section and section 70, an advertisement is distributed if it is communicated to the public in New Zealand (with a view to obtaining business from New Zealand policyholders) by newspaper, magazine, brochure, pamphlet, notice, circular, radio or television broadcast, film, the Internet, or other means.

(3) However, this section does not apply in relation to advertising on an Internet site that is maintained by, or on behalf of, a licensed insurer (but section 67 will apply).

(1) If, for the purposes of this Act, a licensed insurer is given a financial strength rating by an approved rating agency that is lower than the immediately preceding financial strength rating given to the insurer, the insurer must either,—

• (a) within 10 working days after the lower rating is given, give public notice of the fact that the rating has been downgraded; or

• (b) within 60 working days after the lower rating is given, give written notice of the fact that the rating has been downgraded to every New Zealand policyholder under a contract of insurance with the insurer.

(2) A notice given by a licensed insurer under subsection (1) may include any additional matter that the insurer considers is relevant to a proper understanding of the reasons for the downgrading of the rating.

(3) In this section, public notice means the notice is published—

• (a) in 1 or more daily newspapers circulating in each of the cities of Auckland, Hamilton, Wellington, Christchurch, and Dunedin; and

• (b) on an Internet site maintained by, or on behalf of, the licensed insurer.

(1) A licensed insurer must not—

• (a) disclose to a New Zealand policyholder a rating from a non-approved agency; or

• (b) distribute an advertisement relating to any of the insurer's insurance products that refers to a rating from a non-approved agency.

(2) Subsection (1)(a) does not apply in respect of a disclosure to any policyholder that is a related party or an employee of the insurer.

(3) In this section, rating from a non-approved agency means, in relation to a licensed insurer, an assessment of its financial strength or creditworthiness that is in substance a financial strength rating or credit rating (whether called a rating, grading, scoring, ranking, or by any other name) that is issued or given by an agency that is not an approved rating agency.

A licensed insurer commits an offence if it fails to comply with any of sections 63 and 67 to 70 and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) If an overseas policyholder preference may apply in respect of a licensed insurer that is an overseas insurer, the insurer must disclose the nature and the extent of the overseas policyholder preference in the circumstances and in the manner that is prescribed.

(2) An overseas insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) A licensed insurer must be subject to a risk management programme and take all practicable steps to comply with that programme.

(2) The risk management programme must—

• (a) be in writing; and

• (b) set out the procedures that the licensed insurer will use for the effective identification and management of the following risks:

  • (i) insurance risk:

  • (ii) credit risk:

  • (iii) liquidity risk:

  • (iv) market risk:

  • (v) operational risk:

  • (vi) a prescribed type of risk (being a type of risk that is specified in the regulations to apply to the insurer or to a specified class of insurers that includes the insurer); and

• (c) set out appropriate documentation and record-keeping requirements; and

• (d) describe the steps that the licensed insurer will take to ensure that the programme remains current, which must include procedures for regular review of the programme to systematically identify and address deficiencies in the effectiveness of the programme; and

• (e) be appropriate to the operations of the licensed insurer, having regard to the factors relevant to the risks referred to in paragraph (b) (for example, the size of the licensed insurer, its corporate structure (including its relationship with associated persons), its funding structure, the market sector in which it operates, and its business strategy).

(3) The Bank may issue, in the manner that the Governor thinks fit, guidelines relating to the risk categories referred to in subsection (2)(b) that must be covered by the risk management programme (being guidelines that do not have the force of law).

(4) A licensed insurer must obtain the Bank's approval before its risk management programme is amended in a material way.

(5) However, if it is not reasonably practicable for a licensed insurer to obtain the Bank's approval before its risk management programme is amended in a material way (for example, because the amendment needs to be made urgently),—

• (a) the insurer may amend the risk management programme before obtaining the approval; but

• (b) the amendment ceases to have effect if—

  • (i) the insurer fails to notify the Bank of the amendment within 5 working days after the amendment is made; or

  • (ii) the Bank does not give its approval to the amendment within 5 working days after being notified of the amendment.

(1) If a licensed insurer is part of a group of insurers, the risk management programme that the insurer is required to be subject to may, at the option of the insurer, be a risk management programme that applies to the insurer and 1 or more other members of that group (a group programme).

(2) However, if the group programme does not comply with the requirements of section 73(2) in any respect, the licensed insurer must prepare a supplementary document that, when taken together with the group programme, ensures that the requirements of section 73(2) are complied with (in which case the insurer's risk management programme must be taken to be the group programme together with the supplementary document).

A licensed insurer commits an offence if it fails to comply with section 73 and is liable, on summary conviction, to a fine not exceeding $500,000.

(1) A licensed insurer must have an actuary appointed by the insurer.

(2) A licensed insurer may, at any time, appoint an alternate actuary to act as the insurer's appointed actuary if the person appointed under subsection (1) is unable to act (whether by reason of absence or illness or otherwise).

(3) The licensed insurer must, within 6 weeks after a person stops being the appointed actuary under subsection (1) or within any longer period allowed by the Bank, appoint another person to be an appointed actuary (unless the person is replaced under section 149 or 192).

(4) A licensed insurer must not appoint a person under subsection (1) or (2) unless the person is an actuary and is, in accordance with the insurer's fit and proper policy, a fit and proper person to hold the position.

(5) A person appointed under subsection (1) or (2) may be an employee of the licensed insurer or engaged under a contract for services.

(1) A licensed insurer must ensure that the actuarial information contained in, or used in the preparation of, the financial statements of the insurer and any group financial statements referred to in section 81(1) is reviewed by the appointed actuary.

(2) The licensed insurer must take all practicable steps to ensure that the review is completed, and the report referred to in section 78 in respect of the review is prepared, before the date on which the relevant financial statements and group financial statements are required to be registered under the Financial Reporting Act 1993.

(3) The review must be carried out in accordance with an applicable solvency standard.

(4) For the purposes of this section and section 78, actuarial information means—

• (a) information relating to an insurer's calculations of premiums, claims, reserves, dividends, insurance and annuity rates, and technical provisions; and

• (b) information relating to assessments of the probability of uncertain future events occurring and the financial implications for the insurer if those events do occur; and

• (c) information specified in an applicable solvency standard as being actuarial information for the purposes of this section.

(5) A licensed insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $500,000.

The appointed actuary's report in respect of a review under section 77 must state—

• (a) the actuary's name; and

• (b) the work done by the actuary; and

• (c) the scope and limitations of the review; and

• (d) the existence of any relationship (other than that of actuary) that the actuary has with, or any interests that the actuary has in, the licensed insurer or any of its subsidiaries; and

• (e) whether the actuary has obtained all information and explanations that he or she has required; and

• (f) whether, in the actuary's opinion and from an actuarial perspective,—

  • (i) the actuarial information contained in the financial statements and any group financial statements has been appropriately included in those statements (and if not, the respects in which it has been inappropriately included); and

  • (ii) the actuarial information used in the preparation of the financial statements and any group financial statements has been used appropriately (and if not, the respects in which it has been used inappropriately); and

• (g) whether, in the actuary's opinion and from an actuarial perspective, the licensed insurer is maintaining the solvency margin that applies under a condition imposed under section 21(2)(b) (as at the balance date of the insurer); and

• (h) in the case of a life insurer, whether, in the actuary's opinion and from an actuarial perspective, the life insurer is maintaining the solvency margins that apply in respect of its statutory funds under a condition imposed under section 21(2)(c) (as at the balance date of the insurer).

A licensed insurer must ensure that the auditor's report that is prepared under section 16 of the Financial Reporting Act 1993 is accompanied by the appointed actuary's report prepared under section 78 when—

• (a) the auditor's report is delivered for registration under section 18 of that Act; and

• (b) the auditor's report is included in the insurer's annual report (in the case of an insurer that includes the auditor's report in its annual report).

(1) A licensed insurer must ensure that any specified actuary has reasonable access to the accounting records and other documents of the insurer.

(2) A licensed insurer commits an offence if it fails to comply with subsection (1) and is liable, on summary conviction, to a fine not exceeding $1,000,000.

(3) A specified actuary is entitled to require from a director or an employee of the insurer such information and explanations as he or she thinks necessary for the performance of his or her duties as an actuary.

(4) A director or an employee commits an offence if he or she fails to comply with subsection (3) and is liable, on summary conviction, to imprisonment for a term not exceeding 3 months or to a fine not exceeding $200,000 (or both).

(5) It is a defence to a director or an employee charged with an offence under subsection (4) if he or she proves that—

• (a) he or she did not have the information required in his or her possession or under his or her control; or

• (b) by reason of the position occupied by him or her or the duties assigned to him or her, he or she was unable to give the information or explanations required.

(6) In this section, specified actuary, in relation to a licensed insurer, means—

• (a) the appointed actuary; or

• (b) an actuary that is appointed by or under any of the provisions of this Act to perform or exercise any function, duty, or power in respect of the insurer.

(1) A licensed insurer must ensure that, on or before the date on which the financial statements of the insurer and any group financial statements are required to be registered under the Financial Reporting Act 1993,—

• (a) copies of those statements together with a copy of the auditor's report on those statements are given to the Bank; and

• (b) a copy of the appointed actuary's report prepared under section 78 in respect of those statements is given to the Bank.

(2) A licensed insurer must, within 5 months after the end of the first half of each accounting period of the insurer,—

• (a) prepare interim financial statements of the insurer for that half-period; and

• (b) prepare interim group financial statements for a group comprising the insurer and its subsidiaries for that half-period; and

• (c) ensure that copies of those statements together with a copy of the auditor's report on those statements (if any) are given—

  • (i) to the Bank; and

  • (ii) for registration to the Registrar (within the meaning of section 2(1) of the Financial Reporting Act 1993) if this is required by the regulations.

(3) In subsection (2), subsidiaries has the same meaning as in section 2(1) of the Financial Reporting Act 1993.

(4) The interim financial statements and interim group financial statements must—

• (a) be audited if required by the regulations; and

• (b) be prepared in accordance with generally accepted accounting practice (within the meaning of section 3 of the Financial Reporting Act 1993).

(5) This section is subject to any exemption under section 238(1)(a)(iii) in respect of any provision of this section.

(6) A licensed insurer commits an offence if it fails to comply with this section and is liable, on summary conviction, to a fine not exceeding $100,000.

(1) A life insurer must at all times have at least 1 statutory fund in respect of its life insurance business (but may have more statutory funds if it chooses to do so).

(2) A statutory fund is a fund that—

• (a) is established in the records of a life insurer; and

• (b) relates solely to the life insurance business of the life insurer or a particular part of that business.

(3) This subpart does not apply to a life insurer that is included in a class of insurers that is the subject of an exemption under section 238(1)(a)(iv).

(1) The principal requirements of this subpart in relation to statutory funds may be summarised as follows:

• (a) all amounts received by a life insurer in respect of the business of a fund must be credited to the fund:

• (b) all assets and investments related to the business of a fund must be included in the fund:

• (c) all liabilities (including policy liabilities) of the life insurer arising out of the conduct of the business of a fund must be treated as liabilities of the fund:

• (d) the assets of a fund are only available for expenditure related to the conduct of the business of the fund:

• (e) funds may not be restructured or terminated without the approval of the Bank:

• (f) profits and losses of a fund may only be dealt with in accordance with sections 112 to 115 and the associated regulations (the object of those sections and regulations being to ensure that such profits and losses are dealt with in a manner that protects the interests of policyholders and is consistent with prudent management of the fund).

(2) This section is only a guide to the general scheme and effect of this subpart.

(1) For the purposes of this Act, each of the following constitutes a life policy:

• (a) a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life:

• (b) a contract of insurance that is subject to payment of premiums for a term dependent on the termination or continuance of human life:

• (c) a contract of insurance that provides for the payment of an annuity for a term dependent on the continuance of human life:

• (d) a contract of insurance that is, by its terms, to be of more than 1 year's duration and under which a benefit (other than a health insurance benefit) is payable in the event of—

  • (i) the death, by accident or by some other cause stated in the contract, of the person whose life is insured (the insured person); or

  • (ii) injury to, or a disability of, the insured person as a result of accident or sickness; or

  • (iii) the insured person being found to have a stated condition or disease:

• (e) a contract of insurance that constitutes an investment account contract:

• (f) a contract of insurance that constitutes an investment-linked contract (within the meaning of section 98).

(2) However, subsection (1) is subject to subsections (3) and (4) and section 85.

(3) A contract that provides for the payment of a benefit on the death of a person is not a life policy if,—

• (a) by the terms of the contract, the duration of the contract is to be not more than 1 year; and

• (b) payment is only to be made in the event of—

  • (i) death by accident; or

  • (ii) death resulting from a stated condition or disease.

(4) A contract of insurance is not a life policy if it is of a class declared by the regulations not to be life policies.

(5) In subsection (1)(e), investment account contract means a contract that—

• (a) provides for benefits to be paid—

  • (i) on death; or

  • (ii) on a specified date or specified dates or on death before the specified date, or the last of the specified dates, as the case may be; and

• (b) provides for the benefits to be calculated by reference to units the value of which are guaranteed by the contract not to be reduced; and

• (c) provides for the account to be increased (for example, by the amounts of premiums paid or interest payable).

(6) However, a contract is not an investment account contract if it provides for the account to be reduced otherwise than by the amounts of withdrawals by the person responsible for the payment of premiums or by the amounts of charges payable under the contract.

(1) This section applies to contracts of insurance that provide for both life insurance and non-life insurance.

(2) For the purposes of this subpart,—

• (a) if, in relation to an insurance product line, the proportion of the premiums that relate to life insurance is less than 25%, each contract of insurance in the insurance product line must be treated as if it were not a life policy:

• (b) if, in relation to an insurance product line, the proportion of the premiums that relate to non-life insurance is less than 25%, each contract of insurance in the insurance product line must be treated as if it were a life policy:

• (c) in relation to each contract of insurance in any other insurance product line,—

  • (i) to the extent that the contract of insurance relates to life insurance, it must be treated as being a life policy that is separate from the parts of the contract that do not relate to life insurance; and

  • (ii) to the extent that the contract of insurance relates to non-life insurance, it must be treated as being a contract of insurance that is separate from the life policy referred to in subparagraph (i); and

  • (iii) for the purposes of subparagraphs (i) and (ii), the insurer must fairly apportion the premium between those separate contracts.

(3) The proportion of the premiums that relate to either life insurance or non-life insurance must be determined by the appointed actuary.

(4) For the purposes of subsection (3), the appointed actuary must determine the proportions on the basis of premiums allocated, or expected to be allocated, as at the time that the contracts of insurance are entered into.

(5) This section is subject to section 84(3) and (4).

(6) In this section,—

(1) In this subpart, unless the context otherwise requires,—

(2) A reference in this subpart to the business of a statutory fund of a life insurer is a reference to the life insurance business to which the fund relates.

(3) For the purposes of this subpart,—

• (a) a liability (including a policy liability) is taken to be referable to the business of a statutory fund if the liability is of a kind that, under this subpart, may be discharged out of the assets of the fund:

• (b) an expense is taken to be referable to the business of a statutory fund if the expense is of a kind that, under this subpart, may be met out of the assets of the fund:

• (c) a life insurer issues a life policy when the insurer enters into the contract that constitutes the policy.

(1) In the investment, administration, and management of the assets of a statutory fund, a life insurer—

• (a) must comply with this subpart; and

• (b) must give priority to the interests of policyholders of life policies referable to the fund.

(2) In the event of conflict between the interests of policyholders of life policies referable to a statutory fund and the interests of shareholders or members of a life insurer, the life insurer must give priority to the interests of policyholders of those policies over the interests of shareholders or members.

(3) An act or decision of a life insurer in relation to a statutory fund does not contravene subsection (1)(b) if, having regard to the circumstances existing at the time of the act or decision, it is reasonable to believe that the act or decision gives priority to the interests of policyholders of life policies referable to the fund.

(4) An investment by a life insurer is not ineffective merely because it is made in contravention of subsection (1)(b).

(5) A reference in subsections (1) to (3) to the interests of policyholders of life policies referable to a statutory fund is a reference to the interests of those persons viewed as a group.

(6) Nothing in subsection (1) prevents a life insurer doing anything that the life insurer is permitted by or under this subpart to do.

(1) If a life insurer establishes a statutory fund otherwise than under an approval given under section 109, the life insurer must give the Bank written notice of—

• (a) the establishment of the fund; and

• (b) the date on which the fund was established; and

• (c) the nature of the life insurance business of the life insurer to which the fund relates; and

• (d) any other prescribed matters.

(2) The notice must be given in the prescribed manner.

A life insurer must transfer to a statutory fund on its establishment assets of a value that is ascertained in the prescribed manner.

(1) For the purposes of this Act, the assets of a statutory fund at a particular time are the following:

• (a) the balance of money represented by amounts credited to the fund in accordance with section 92:

• (b) assets of the life insurer obtained as a result of the expenditure or application of money credited to the fund:

• (c) investments held by the life insurer as a result of the expenditure or application of money credited to the fund:

• (d) other money, assets, or investments of the life insurer transferred to the fund, whether under this subpart or otherwise.

(2) Assets or investments obtained by the application of assets (other than money) of a statutory fund are themselves assets of the fund.

(3) A life insurer must keep assets of a statutory fund distinct and separate from assets of other statutory funds and from all other money, assets, or investments of the life insurer.

(4) Nothing in this subpart is intended to constitute a life insurer or the directors of a life insurer a trustee or trustees of the assets of the statutory funds of the life insurer.

(1) A policy document must specify the statutory fund or statutory funds to which the life policy is referable.

(2) A policy document must not make provision inconsistent with section 82.

(3) A provision in a policy document that a life policy is referable to 2 or more statutory funds is not effective unless it specifies—

• (a) the benefits under the policy that are to be provided out of each fund; and

• (b) either—

  • (i) the proportion of the premium that is related to the benefits to be provided out of each fund and is to be credited to the fund; or

  • (ii) the way in which that proportion is to be calculated.

(4) Subsection (1) does not prevent a policy document being endorsed so as to change the statutory fund or funds to which the life policy is referable.

(5) If a life policy was issued before the commencement of this section and, since that commencement, the life insurer that issued the policy has given the policyholder written notice of the statutory fund or funds to which the policy is referable, this subpart has effect as if the notice were part of the policy document relating to the policy.

(6) During the period of 12 months beginning at the commencement of this section, subsection (1) does not apply to the policy document relating to a life policy issued before the commencement of this section.

The following amounts must be credited by a life insurer to a statutory fund:

• (a) amounts that must, in accordance with the regulations, be credited to the statutory fund on its establishment:

• (b) premiums payable under life policies referable solely to the fund:

• (c) in the case of a life policy that is referable to the fund and to 1 or more other statutory funds, the proportion of the premium that, by virtue of a provision in the policy document, is to be credited to the fund:

• (d) amounts paid to the life insurer in relation to a liability under section 105 or 107 in relation to the fund:

• (e) income from the investment of assets of the fund:

• (f) money paid to or by the life insurer to the credit of the fund under a judgment of a court relating to any matter concerning the business of the fund or any failure to comply with this subpart in relation to the fund:

• (g) any other money received by the life insurer in connection with its conduct of the business of the fund.

(1) Nothing in this subpart prevents a life insurer from making a capital payment to a statutory fund.

(2) For the purposes of this subpart, a life insurer makes a capital payment to a statutory fund if it credits to the fund an amount that—

• (a) is not required to be credited to the fund; and

• (b) does not represent any part of the assets of another statutory fund.

(1) A life insurer must not apply, or deal with, assets of a statutory fund, whether directly or indirectly, except in accordance with this section.

(2) The assets of a statutory fund may only be applied by the life insurer—

• (a) to meet liabilities (including policy liabilities) or expenses incurred for the purposes of the business of the fund; or

• (b) for the making of investments in accordance with section 99; or

• (c) for the purposes of a distribution under section 114 or 115.

(3) A life insurer must not mortgage or charge any of the assets of a statutory fund except to secure a bank overdraft for the purposes of the business of the statutory fund.

(4) A life insurer must not borrow money, for the purposes of the business of a statutory fund, by means of an unsecured borrowing if the result would be that the total amount of principal outstanding under unsecured borrowings for the purposes of the business of the fund would exceed an amount ascertained in the prescribed manner.

(5) In subsection (4), unsecured borrowing does not include—

• (a) a borrowing of money by means of a bank overdraft; or

• (b) a borrowing of money by means of a prescribed arrangement.

(6) The assets of a statutory fund are not available to meet a liability of a life insurer under a contract of guarantee unless—

• (a) the contract of guarantee was entered into by the life insurer in connection with an investment by the life insurer of assets of the fund; and

• (b) the investment was made in accordance with this subpart.

(7) Nothing in this section applies to the transfer of assets from one statutory fund to another in accordance with sections 109 to 111, or section 114 or 115.

(1) A life insurer fails to comply with this subpart if it engages in the practice of reinsurance between statutory funds of the life insurer.

(2) For the purposes of subsection (1), the practice of reinsurance between statutory funds consists of the following elements:

• (a) part of the premium payable under a life policy referable to one statutory fund is credited to another statutory fund to which the policy is not referable (the reinsuring fund):

• (b) a corresponding proportion of the liability under the life policy is treated as a liability for the discharge of which the assets of the reinsuring fund are available.

(1) A transaction (other than a transaction to which section 97 applies) entered into in contravention of section 94 is of no effect.

(2) Subsection (1) is subject to subsection (3) and section 87(4).

(3) The High Court, on application by a party to the transaction, may make an order declaring that the transaction is effective, and is to be taken always to have been effective, for all purposes.

(4) If the High Court is satisfied that the applicant entered into the transaction in good faith and without knowledge of the contravention of section 94, the court may have regard to any hardship that would be caused to the applicant if an order were not made under subsection (3).

(5) Subsection (4) does not limit the matters to which the High Court may have regard on an application under subsection (3).

(1) A transaction that is included in a class of transactions declared by the regulations to be transactions to which this section applies is not ineffective merely because it was entered into in contravention of section 94.

(2) The High Court, on application by the Bank, may make an order declaring that a particular transaction entered into in contravention of section 94 is, and is to be taken always to have been, of no effect for any purpose.

(3) The High Court must not make an order under subsection (2) if it is satisfied that the effect of the order (if made) would be to prejudice the rights of any person in respect of, or arising out of, the transaction that have been acquired in good faith and without knowledge of the contravention.

(1) This section applies to a statutory fund if—

• (a) the business of the fund includes the provision of investment-linked benefits; and

• (b) any of the policies referable to the fund includes an investment performance guarantee.

(2) A life insurer must at all times comply with the restrictions on, and other requirements in respect of, the investment performance guarantee that are prescribed for the purposes of this section (if any).

(3) In this section,—

(1) A life insurer may invest the assets of a statutory fund in any way that is likely to further the business of the fund.

(2) However, subsection (1) is subject to the following qualifications:

• (a) nothing in this subpart authorises a life insurer to make an investment the life insurer would otherwise be prohibited from making:

• (b) nothing in this subpart authorises a life insurer to make an investment the life insurer would not otherwise have the power to make:

• (c) except with the approval of the Bank or otherwise in the prescribed circumstances, a life insurer must not invest assets of a statutory fund in an associated person that is not a subsidiary of the life insurer:

• (d) a life insurer must not invest assets of a statutory fund, or keep assets of a statutory fund invested, in a subsidiary of the life insurer if the investment, or the retention of the investment, as the case requires, is prohibited by the regulations.

(3) The Bank's approval under subsection (2)(c) may be given—

• (a) when the licence is issued to the life insurer or at any other time; and

• (b) in relation to a particular investment or investments of a particular class.

(4) Nothing in subsection (2)(c) or (d) prevents a life insurer investing assets of a statutory fund, or keeping assets of a statutory fund invested, in ordinary voting shares of public issuers that are associated persons of the life insurer (whether or not they are subsidiaries) if the value of the assets of the fund so invested does not exceed a prescribed percentage of the value of all assets of the fund.

(5) A transaction is not ineffective merely because it involves a contravention of subsection (2)(c) or (d).

(6) Nothing in this section—

• (a) prevents a life insurer from investing money of a statutory fund by way of deposit with—

  • (i) a registered bank (within the meaning of the Reserve Bank of New Zealand Act 1989); or

  • (ii) a bank that is authorised to accept deposits under the law of an overseas jurisdiction; or

• (b) requires the approval of the Bank for such an investment.

(7) For the purposes of this subpart, an investment by way of a loan is to be taken to be made when the loan agreement is entered into.

(8) In this section, public issuer means a person who is a party to a listing agreement with, or whose securities are otherwise quoted on,—

• (a) a registered exchange (within the meaning of section 2(1) of the Securities Markets Act 1988); or

• (b) a stock exchange in an overseas jurisdiction.

(1) A life insurer must, in the prescribed manner, keep a record of its restricted investments.

(2) In this section, restricted investment—

• (a) means any investment of assets of a statutory fund of a life insurer in a related party; but

• (b) does not include an investment of assets of a statutory fund by way of deposit with a registered bank (within the meaning of the Reserve Bank of New Zealand Act 1989), even though the bank is a related party of the life insurer concerned.

(1) A life insurer must not transfer an asset from one statutory fund to another statutory fund except in accordance with subsection (2), or sections 109 to 111, or section 114 or 115.

(2) A life insurer may transfer an asset from one statutory fund (the losing fund) to another statutory fund (the gaining fund) if—

• (a) the life insurer transfers from the gaining fund to the losing fund an amount equal to the fair value of the asset; and

• (b) in relation to the policyholders of life policies referable to the losing fund and the gaining fund, the transfer is fair and reasonable in all the circumstances.

(3) For the purposes of subsection (2), the fair value of an asset is the price a person could reasonably be expected to pay for the asset on a sale in which the seller and buyer were dealing with each other at arm’s length.

(4) Subsection (1) does not prevent a liquidator doing anything authorised or required by or under any enactment.

(1) A life insurer must not change the statutory fund or funds to which a life policy is referable, or terminate a statutory fund, except in accordance with sections 91(4) and 111 or section 109 or 110.

(2) Subsection (1) does not prevent a liquidator doing anything authorised or required by or under any enactment.

(1) The Governor-General may, by Order in Council, on the advice of the Minister given in accordance with a recommendation of the Bank, make regulations that—

• (a) specify what constitutes income of a statutory fund; and

• (b) specify what constitutes outgoings of a statutory fund; and

• (c) provide for the apportionment of amounts of income or outgoings or of liabilities so as to determine the part of the amount or portion of the liability that is related or referrable to the business of a statutory fund or to a category of business of a statutory fund.

(2) If regulations are made for the purposes of subsection (1), then, for the purposes of this subpart,—

• (a) what constitutes income of a statutory fund must be determined in accordance with the regulations; and

• (b) what constitutes outgoings of a statutory fund must be determined in accordance with the regulations; and

• (c) what part of an amount of income or outgoings or portion of a liability that is related or referrable to the business of a statutory fund or to a category of business of a statutory fund must be determined in accordance with the regulations.

A life insurer must keep records of the income and outgoings of each statutory fund of the insurer that properly record the affairs and transactions of the insurer in respect of those funds.

(1) A director of a life insurer has a duty to the policyholders of life policies referable to a statutory fund of the life insurer to take reasonable care, and use due diligence, to see that, in the investment, administration, and management of the assets of the fund, the life insurer—

• (a) complies with this subpart; and

• (b) gives priority to the interests of policyholders of life policies referable to the fund.

(2) In the event of conflict between the interests of policyholders of life policies referable to a statutory fund and the interests of shareholders or members of a life insurer, a director’s duty is to take reasonable care, and use due diligence, to see that the life insurer gives priority to the interests of policyholders of those policies over the interests of shareholders or members.

(3) A reference in subsection (1) or (2) to the interests of policyholders of life policies referable to a statutory fund is a reference to the interests of those persons viewed as a group.

(4) A director of a life insurer does not commit a breach of duty because of the doing of an act by the life insurer if the life insurer is permitted by or under this subpart to do the act.

(5) If, in respect of any act or omission of a life insurer, a director of the life insurer has failed to comply with subsection (1) and the act or omission of the life insurer results in a loss to a statutory fund of the life insurer, the director is liable to pay to the life insurer an amount equal to the amount of the loss.

(6) If 2 or more persons are liable under subsection (5) in relation to the same act or omission, the liability of those persons is joint and several.

(7) An action under subsection (5) may be brought—

• (a) by the life insurer; or

• (b) with the written approval of the Bank, by the policyholder of a life policy referable to the statutory fund involved.

(8) An approval under subsection (7)(b) may be given subject to conditions relating to the persons, or the number of persons, who may join in the action as plaintiffs.

(9) A person cannot be ordered to pay an amount under this section and under section 107 in respect of the same act or omission of a life insurer.

(10) This section applies despite anything to the contrary in the Companies Act 1993 or any other enactment (and the duties of a director of a life insurer specified by or under any other enactment are subject to this section to the effect that the director will not be in breach of those duties as a result of complying with the duties imposed under this section).

(1) If a life insurer has failed to comply with this subpart, the Bank may give the life insurer a written notice requiring the life insurer, within a specified period, to take the action that is specified in the notice to remedy the failure.

(2) The period specified in the notice must be a period ending not earlier than 1 month after the giving of the notice.

(3) The action to be specified in the notice is the action that the Bank thinks appropriate and reasonable to overcome the effects of the failure to comply.

(4) At any time before the end of the period specified in the notice, the Bank may extend the period by any further period that the Bank thinks fit.

(5) A life insurer must comply with a notice under subsection (1).

(1) Subsection (2) applies if—

• (a) the Bank has given a notice to a life insurer under section 106 in respect of a contravention of this subpart; and

• (b) the contravention has resulted in a loss to a statutory fund; and

• (c) the life insurer has failed to comply with the notice within the period specified in it or within that period as extended under section 106(4).

(2) The persons who were the directors of the life insurer when the contravention of this subpart occurred are jointly and severally liable to pay to the life insurer an amount equal to the amount of the loss.

(3) A person is not liable under subsection (2) if the person proves that he or she used due diligence to prevent the occurrence of the contravention or to ensure that the life insurer complied with the notice.

(1) If the Bank thinks that it is in the interests of the policyholders of life policies referable to a statutory fund to do so, the Bank may bring an action against a person in the name, and for the benefit, of a life insurer for the recovery of an amount that the life insurer is entitled to recover under section 107.

(2) In an action under subsection (1), the court may make any order in the matter as to costs and otherwise as it thinks fit.

(1) A life insurer may apply to the Bank to restructure its statutory funds by making 1 or more life policies that are referable to a statutory fund or funds of the life insurer become referable to another statutory fund or funds of the life insurer (whether existing or proposed).

(2) If the application is approved, the restructure may take place in accordance with any conditions that the Bank may impose.

(3) The conditions may include (without limitation) conditions relating to the following:

• (a) a requirement to notify interested persons of the outcome of the application:

• (b) matters connected with how the restructure takes place, including the following:

  • (i) life policies becoming referable to a receiving fund or funds:

  • (ii) policy liabilities and other liabilities becoming referable to a receiving fund or funds:

  • (iii) assets of a transferring fund becoming assets of a receiving fund or funds:

  • (iv) the timing of the restructure:

  • (v) if a receiving fund is a proposed new statutory fund, the establishment of that fund.

(4) The Bank must not approve the application if it considers that—

• (a) the restructure will result in unfairness to the policyholders of life policies referable to a transferring fund or a receiving fund when those policyholders are viewed as a group; or

• (b) immediately after the restructure,—

  • (i) the life insurer will fail to maintain a solvency margin in respect of a transferring fund; or

  • (ii) the life insurer will fail to maintain a solvency margin in respect of a receiving fund; or

• (c) the life insurer is being liquidated or wound up when the application is made.

(5) Subsection (4)(b)(i) does not apply if the transferring fund is to be wound up.

(6) In this section,—

(1) A life insurer may apply to the Bank to terminate 1 or more of its statutory funds.

(2) If the application is approved, the termination may take place in accordance with any conditions that the Bank may impose.

(3) The conditions may include (without limitation) conditions relating to the following:

• (a) a requirement to notify interested parties of the outcome of the application:

• (b) matters connected with how the termination takes place, including the following:

  • (i) distribution or application of assets:

  • (ii) settling of liabilities:

  • (iii) the timing of the termination.

(4) The Bank must not approve the application if it considers that—

• (a) the termination will result in unfairness to the policyholders of life policies referable to the fund or funds when those policyholders are viewed as a group; or

• (b) the life insurer is being liquidated or wound up when the application is made.

(1) Subsection (2) applies if—

• (a) a life insurer has more than 1 statutory fund; and

• (b) because of an endorsement referred to in section 91(4), either—

  • (i) a life policy has ceased to be referable to one of those funds and become referable to another fund; or

  • (ii) a life policy referable to 1 or more of those funds has become referable to a further fund or funds.

(2) The life insurer must transfer to each fund to which the policy has become referable assets of a value equivalent to such part of the liabilities of the life insurer as is ascertained in the prescribed manner.

(3) If, because of an endorsement referred to in section 91(4), a life policy that is referable to a statutory fund becomes referable to another statutory fund, or a life policy that is referable to 1 statutory fund becomes referable to 2 or more statutory funds, the life insurer concerned must give notice to the policyholder of the policy in the prescribed manner.

(4) In this section, liabilities, in relation to a life insurer, means—

• (a) policy liabilities; and

• (b) reserves; and

• (c) any other liabilities of the life insurer.

(1) A life insurer must, in the prescribed circumstances and in the prescribed manner, allocate the operating profit or operating loss of—

• (a) a statutory fund; or

• (b) a category of business of a statutory fund.

(2) The categories of business of a statutory fund for the purposes of this subpart are the categories of business that are determined in the prescribed manner.

(1) A life insurer must allocate to shareholders’ or members' capital of a statutory fund all capital payments made to the fund under section 93.

(2) A life insurer allocates a capital payment by—

• (a) identifying in its financial statements prepared as at the end of the period in which the payment was made the amount of the payment; and

• (b) identifying that amount as an amount that should be added to shareholders’ or members' capital.

The distribution of retained profits of a statutory fund may be made only in accordance with the prescribed requirements.

A distribution of shareholders’ or members' capital in relation to a statutory fund may be made only in accordance with the prescribed requirements.

(1) In a liquidation or other winding up of a life insurer, the assets of a statutory fund (the primary fund) must first be applied in discharging the following expenses, fees, debts, and claims, in the order of priority in which they are listed:

• (a) the fees and expenses properly incurred by the liquidator in carrying out the duties and exercising the powers of the liquidator, and the remuneration of the liquidator:

• (b) the reasonable costs of a person who applied to a court for an order that the insurer be put into liquidation or wound up, including the reasonable costs incurred between lawyer and client in procuring the order:

• (c) the actual out-of-pocket expenses necessarily incurred by any liquidation committee:

• (d) to any creditor who protects, preserves the value of, or recovers assets of the primary fund for the benefit of the insurer's creditors by the payment of money or the giving of an indemnity,—

  • (i) the amount received by the liquidator by the realisation of those assets, up to the value of that creditor's unsecured debt; and

  • (ii) the amount of the costs incurred by that creditor in protecting, preserving the value of, or recovering those assets.

(2) In this section, liquidator includes a person who is occupying the position of a liquidator of the insurer by whatever name called.

(3) Subsection (1) has effect only to the extent that expenses, fees, debts, and claims are liabilities that are referable to the business of the primary fund.

(4) If any assets remain after the application of subsection (1), the assets must be applied according to the following rules:

• (a) the assets are to be applied first in discharge of policy liabilities of the life insurer referable to the primary fund:

• (b) if any assets remain, they are to be applied in discharge of other liabilities that are referable to the business of the primary fund:

• (c) if, after the application of assets according to paragraphs (a) and (b), any assets of the primary fund remain, those assets are to be applied in the manner that the High Court directs.

(5) If, for the purposes of subsection (4)(a), the assets are insufficient to discharge all of the policy liabilities of the life insurer referable to the primary fund, the assets are to be applied in discharge of those policy liabilities in the manner that the High Court directs.

(6) If, for the purposes of subsection (4)(b), the assets are insufficient to discharge all of the other liabilities that are referable to the business of the primary fund, the assets are to be applied in discharge of those liabilities in the manner that the High Court directs.

(7) Directions given for the purpose of subsection (4)(c), (5), or (6) are to be the directions that the High Court considers equitable, having regard to,—

• (a) in the case of subsection (4)(c),—

  • (i) the interests of the policyholders of life policies referable to the primary fund; and

  • (ii) the interests of the policyholders of life policies referable to statutory funds of the life insurer other than the primary fund; and

  • (iii) the interests of creditors of the life insurer whose debts have not been discharged by the application of assets according to subsection (4)(b); and

  • (iv) the interests of shareholders or members of the life insurer:

• (b) in the case of subsection (5), the interests of the policyholders of life policies referable to the primary fund:

• (c) in the case of subsection (6), the interests of creditors in respect of the other liabilities that are referable to the business of the primary fund.

(8) The reference in subsection (7)(a)(iii) to creditors of a life insurer is not limited to creditors to whom amounts are due in relation to the business of a statutory fund, but includes all creditors of a life insurer, whatever the nature of the liabilities involved.

(9) If a liability of the life insurer is referable to 2 or more statutory funds or is referable in part to a statutory fund but is also related to business, other than life insurance business, carried on by the insurer, the liquidator may apportion the liability so as to determine the part of the liability that is to be borne by each of the statutory funds or by the statutory fund, as the case may be.

(10) In making an apportionment under subsection (9), the liquidator must comply with any directions of the High Court.

(11) The part of the amount so determined in relation to a statutory fund is to be treated as a liability of the life insurer that is referable to the business of the fund.

(12) This section applies despite anything to the contrary in the Companies Act 1993.

(1) Subsection (2) applies if—

• (a) a life insurer contravenes this subpart in relation to a statutory fund; and

• (b) the contravention results in a loss to the statutory fund; and

• (c) the life insurer has been put into liquidation or is otherwise being wound up.

(2) The persons who were the directors of the life insurer when the contravention occurred are jointly and severally liable to pay to the insurer an amount equal to the amount of the loss.

(3) A person is not liable under subsection (2) if the person proves that he or she used due diligence to prevent the occurrence of the contravention.

(4) On application by the liquidator of the licensed insurer, the High Court may order any person liable under subsection (2) to pay to the insurer the whole or any part of the loss.

(5) A person cannot be made liable both under this section and under sections 105 to 108 in respect of the same contravention.

(1) A life insurer commits an offence if it fails to comply with this subpart and is liable, on summary conviction, to a fine not exceeding $500,000.

(2) Section 216 (which relates to the liability of directors) does not apply in respect of an offence under this section.

(1) The Bank may, by notice to an overseas insurer, exempt the insurer (and its directors) from compliance with this subpart.

(2) The Bank must, before granting an exemption, be satisfied that—

• (a) the overseas insurer is required, under the law or other regulatory requirements of the home jurisdiction of the insurer, to maintain, in respect of its life insurance business, a statutory fund or other arrangement for separating its life insurance obligations from its other obligations; and

• (b) there is no overseas policyholder preference in relation to payments out of, or in respect of, the statutory fund or arrangement; and

• (c) the nature and extent of prudential supervision that applies in respect of the statutory fund or arrangement is, in terms of achieving the purposes of this Act, at least as satisfactory as the nature and extent of prudential supervision that applies in respect of statutory funds under this subpart.

(3) The matters in subsection (2) must be treated as being satisfied in respect of an overseas insurer that is incorporated in a jurisdiction that is prescribed for the purposes of this subsection.

(4) This section is subject to section 232 (which provides for general provisions relating to exemptions).