Insurance (Prudential Supervision) Bill

  • enacted

Hon Simon William English

Insurance (Prudential Supervision) Bill

Government Bill

95—2

As reported from the Finance and Expenditure Committee

Contents

Commentary

Key

1 Title

2 Commencement

Part 1
Preliminary provisions

Purposes and principles

3 Purposes

4 Principles to be taken into account under this Act

Overview

5 Overview

Interpretation

6 Interpretation

7 Meaning of contract of insurance

8 Meaning of carrying on insurance business in New Zealand

8A Bank may declare that person is not carrying on insurance business in New Zealand in certain circumstances

9 Meaning of associated person and holding entity

10 Application of Act to friendly societies and credit unions

Bank's functions

11 Bank's functions under Act

12 Bank must have regard to directions about Government policy objectives

Act binds the Crown

13 Act binds the Crown

Part 2
Licensing and prudential regulation of insurers

Subpart 1Licensing of insurers

Requirement to be licensed

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

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

Process for obtaining licence

16 Application for licence as insurer

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

18 Entitlement to licence

19 Carrying on business in prudent manner

Conditions of licence

20 Conditions of licence

21 Bank may modify conditions of licence

22 Offence to fail to comply with conditions of licence

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

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

Notification of decision

24 Bank must notify applicant of decision and give notice on its Internet site

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

25 Bank must be notified before controlling interest is acquired or obtained and before corporate form is changed

26 Bank must notify decision within 20 working days of receiving all relevant information

27 Meaning of controlling interest

25 Bank must be notified before control is obtained

26 Bank must be notified before corporate form is changed

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

27A Offence to fail to notify or provide information

Cancellation of licence

28 Cancellation of licence

29 Assignment of liabilities to enable cancellation

30 Bank's approval of assignment

31 Effect of assignment

Fit and proper requirements

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

33 Group fit and proper policy

34 Fit and proper matters

34 Fit and proper standards

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

36 Bank may exempt overseas insurers from compliance with section 35(1)

37 Power to remove directors and relevant officers

38 How power to remove is exercised

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

40 Appeals from Bank's decision

41 Appeal to Court of Appeal on question of law

Transfers and amalgamations

42 Transfers and amalgamations must be approved

43 Request for approval

44 Actuarial or other report on transfer or amalgamation proposal

45 Costs of report

46 Bank must have regard to certain matters in considering request

47 Bank's decision on approval

48 Offence to fail to comply with conditions of approval

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

50 Transfer or amalgamation not invalidated

51 Effect of assignment for purposes of approved transfer

Publication of policies

52 Publication of policies

Subpart 2Prudential regulation of insurers

Solvency standards

53 Bank may issue solvency standards

54 Public notice of solvency standards

55 Consultation

56 Matters that may be contained in solvency standards

57 Offence to fail to comply with reporting and disclosure requirements

58 Incorporation by reference

59 Bank may amend or revoke solvency standard

60 Bank may exempt overseas insurers from compliance

Financial strength ratings

61 Licensed insurer must have current financial strength rating

61A Financial strength rating must refer to overseas policyholder preference

62 Bank may approve rating agencies

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

64 Disclosure of current rating to policyholder

65 Disclosure by insurers not required to be rated

66 Policyholder may cancel if disclosure is not made

67 Disclosure of rating on licensed insurer's Internet site

68 Other advertising of ratings

69 Licensed insurer must disclose downgrading in rating to policyholders under contracts of insurance with duration of more than 1 year

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

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

71 Offence to fail to comply with disclosure obligations

Disclosure of overseas policyholder preference

72 Overseas insurer must disclose overseas policyholder preference

Risk management

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

74 Group risk management programme

75 Offence to fail to comply with risk management requirements

Appointment of actuary and actuarial review

76 Requirement for licensed insurers to have appointed actuary

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

78 Appointed actuary's report

79 Provisions relating to auditor's report

80 Access to information

Supply of financial statements

81 Financial statements must be given to Bank

Subpart 3Statutory funds of life insurers

General requirements

82 Requirement that life insurer have statutory funds

83 Overview of requirements regarding statutory funds

84 Meaning of life policy

85 Composite policies

86 Interpretation in this subpart

87 Duty of life insurer in relation to statutory funds

88 Notice to Bank when fund established

88A Life insurer must transfer assets on establishment

89 Assets of statutory fund

90 Identification of life policies referable to statutory fund

91 Payments to statutory fund

92 Capital payments to statutory funds

93 Expenditure and application of statutory fund

94 Prohibition of reinsurance between funds

95 Effect of non-compliance with section 93: general

96 Effect of non-compliance with section 93: certain classes of transactions

97 Investment performance guarantee: limit of certain liabilities

98 Investment of statutory funds

99 Recording of restricted investments

100 Transfer of assets between funds

101 Restriction on restructure or termination of statutory funds

102 Ascertainment of income and outgoings of statutory fund

Duties and liabilities of directors, etc

103 Duty of directors in relation to statutory funds

104 Bank may give notice

105 Liability of directors

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

Restructure and termination of statutory funds

107 Restructure of statutory funds

108 Termination of statutory funds

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

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

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

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

111 Allocation of capital

112 Distribution of retained profits

113 Distribution of shareholders’ or members' capital

Application of statutory fund assets on liquidation or winding up

114 Application of statutory fund assets

Liability of directors for loss to statutory fund

115 Liability of directors for loss to statutory fund

Offence

116 Offence to fail to comply with subpart

Exemptions

117 Bank may exempt overseas insurers from compliance with subpart

Part 3
Prudential supervision of licensed insurers

Bank to undertake prudential supervision

118 Prudential supervision

Supply of information

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

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

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

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

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

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

125 Disclosure of information to Bank by auditors and actuaries

126 Auditor or actuary to inform of intention to disclose

127 Protection of auditors and actuaries

Investigations

128 Investigations

129 Power to obtain information or documents

130 Power to enter and search place

131 Offences in relation to investigations

132 Effect of final decision that exercise of powers under sections 128 and 129 unlawful

Miscellaneous provisions

133 Confidentiality of information, data, documents, and forecasts

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

135 Application of other enactments to information, data, documents, or forecasts published or disclosed under section 133

Part 4
Distress management

Subpart 1Recovery plans

136 Bank may require licensed insurer to prepare recovery plan

137 Recovery plan must be provided to Bank for approval

138 Licensed insurer must comply with recovery plan

139 Amendments to recovery plan

140 Offence to fail to comply with recovery plan requirements

Subpart 2Directions to licensed insurers and associated persons

141 Bank may give directions to licensed insurer

142 Scope of directions to licensed insurer

143 Bank may give directions to associated person

144 Scope of directions to associated person

145 Miscellaneous matters relating to directions

146 Offence to contravene directions

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

148 Offence to disclose giving of direction or notice

Subpart 3Liquidation or voluntary administration of licensed insurers

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

149 Bank may apply for liquidation of insurers

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

151 Bank may apply for voluntary administration of licensed insurers

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

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

Bank's participation in insolvency procedures and certain other proceedings

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

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

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

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

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

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

Special insolvency provisions for insurers

159 High Court may reduce value of contracts of insurance

160 High Court may require actuarial report

161 Continuation of life policies if insurer in liquidation

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

163 Right to attend and be heard

164 Approval of scheme

165 Effect of approval

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

167 Valuation of policies by liquidator or deed administrator

Subpart 4Statutory management

Commencement of statutory management

168 Statutory management of licensed insurers and associated persons

169 Statutory management of overseas persons

170 Date and time of appointment

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

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

173 Bank must give notice of recommendation

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

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

Exercise of powers

176 Considerations affecting exercise of powers by statutory manager

177 Statutory manager to comply with directions of Bank

Application of Corporations (Investigation and Management) Act 1989

178 Application of Corporations (Investigation and Management) Act 1989

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

Power to obtain documents and information

180 Powers to obtain documents and information

Sales and dispositions

181 Sale requires Bank's approval

182 Consents not required under other enactments

Body corporate may be formed to acquire branch of overseas person

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

184 Vesting of property subject to security

185 Proof of vesting

186 Provisions applying if liabilities included in sale

Obligations incurred by statutory manager

187 Obligations incurred by statutory manager

Value of contracts of insurance

188 Statutory manager may value policies

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

Auditor, actuary, and annual financial statements and records

190 Appointment of auditor and actuary

191 Prior auditor or actuary ceases to hold office

192 Removal of auditor or actuary

193 Annual financial statements

194 Annual report by statutory manager

Termination of statutory management

195 Termination of statutory management by Order in Council

196 Termination of statutory management on liquidation

197 Time of termination

Part 5
Miscellaneous provisions

Provisions relating to Lloyd's

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

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

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

200A Bank must issue temporary licence to Lloyd's pending consideration of its application

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

202 Issue of licence to Lloyd's

203 Conditions of Lloyd's licence

203A Obligations on Lloyd's

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

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

206 Agent of Lloyd’s and address for service

207 Lloyd’s to give notice of enactments and bylaws

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

Access to information by overseas supervisor

209 Access to information by overseas supervisor

210 Duties of person on receipt of notice under section 209

Offences

211 False declarations and representations

212 Liability of directors

213 Defence for offences against this Act

Prohibition against falsely holding out New Zealand connection

214 Prohibition against falsely holding out New Zealand connection

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

216 Prohibition does not apply in certain cases

Restriction on insurer's constitution

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

Ban ordered by District Court

218 Power to ban certain persons from participating in insurance business

219 Notice of hearing

220 Appeals to High Court

221 Appeal to Court of Appeal on question of law

222 Register of banned persons

223 Search of register

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

Notice and service

225 Notice and service of documents

Protection from liability and indemnity

226 Protection from liability

227 Indemnity

General provisions relating to declarations and exemptions

228 General provisions relating to declarations and exemptions

General provisions relating to fit and proper standards and solvency standards

228A Status of standards

228B Public notice of standards

228C Consultation

228D Bank may amend, revoke, or replace standard

Regulations

229 Regulations

229A Regulations may provide for exemptions

Repeals and consequential amendments

230 Amendments to Life Insurance Act 1908

231 Repeals

232 Amendments to other enactments

232A Amendment to Financial Service Providers (Registration and Dispute Resolution) Act 2008

Transitional provisions

232B Bank may approve certain transfers

233 Bank must issue provisional licence pending consideration of application

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

235 Duration of provisional licence

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

237 Conditions of licence

238 Public Trust must return deposits

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

Schedule 1
General provisions relating to incorporation by reference

Schedule 2
General provisions relating to search powers

Schedule 3
Consequential amendments

Legislative history


The Parliament of New Zealand enacts as follows: