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Insurance (Prudential Supervision) Bill Government Bill As reported from the Finance and Expenditure Committee Commentary Recommendation The Finance and Expenditure Committee has examined the Insurance (Prudential Supervision) Bill and recommends that it be passed with the amendments shown.

Introduction The Insurance (Prudential Supervision) Bill seeks to reform and ex- tend prudential supervision to cover the insurance industry.
It would establish a system for licensing insurers, impose prudential require- ments on insurers, provide for the supervision of compliance with those requirements by the Reserve Bank, and confer certain powers on the Reserve Bank to act in respect of insurers in financial or other difficulties.
The bill is intended to cover most entities that undertake insurance business in New Zealand, including life insurers, health insurers, captive insurers, re-insurers, and the insurance activities of incorp- orated societies.

However, we are recommending that “discretionary 95—2 2 Insurance (Prudential Supervision) Bill Commentary mutual organisations” and trade or professional associations not be covered by the bill.

This is discussed further below.


This commentary deals only with the substantive amendments we recommend to the bill; it does not discuss proposed technical, conse- quential, or minor drafting amendments.

Licensing of insurers Definitions of “contract of insurance” and “carrying on insurance business in New Zealand” We recommend the deletion of clause 7(3) in order to clarify the application of the bill.
The definition of “contract of insurance” in clause 7 is critical to the bill, and should be as clear as possible in its intent.

In the bill as introduced, this subclause could be confusing for insurers as it could be interpreted to contradict subclause 7(1), and might widen the application of the bill beyond that which is currently considered to constitute insurance.
Deleting the subclause would also result in the exemption of discretionary mutual organisations, which we consider accords with the policy intent of the bill.

The ex- clusion of discretionary mutuals from the regime is discussed below.

We also recommend the inclusion of new clause 8(1)(a)(iia) to make it clearer that the definition of carrying on insurance business in New Zealand includes overseas persons that are not bodies corporate.
In the bill as introduced, this clause would make the bill apply to all forms of legal entity (including credit unions, friendly societies, and other mutuals) and partnerships formed in New Zealand, though the status of an overseas person that was not a body corporate would be unclear.

Our amendment would recognise that associations of persons formed outside New Zealand may be carrying on insurance business in New Zealand, meaning that they could be captured by the regime.
Exemptions for certain types of insurers We recommend the insertion of new clause 229A to provide for regu- lations to be made exempting existing “small” insurers from certain requirements of the bill: financial strength ratings, statutory funds requirements, some requirements relating to financial reporting, and minimum capital requirements.
Whilst these requirements would not apply to small insurers, other requirements of the bill would, includ- Commentary Insurance (Prudential Supervision) Bill 3 ing obtaining a licence, meeting fit and proper standards, risk man- agement requirements, and appointing an actuary.

We also recom- mend there be sufficient flexibility in the bill to apply special con- ditions of licence to small insurers on matters such as solvency.
We consider that “small” insurers should be defined by the amount of their annual gross premium income; this amount would be specified in regulations, and is likely to be between $1 million and $1.5 mil- lion.
We are recommending the establishment of a graduated regime for small insurers because such entities could find a number of require- ments in the full regime particularly onerous, to the point that it might put their viability at serious risk; and because no real benefit would be gained from applying the entire regime to small insurers.

For this reason, we believe concessions to small existing insurers are justi- fiable.
We also recommend that small insurers who become estab- lished after the passage of the bill into law not have access to this framework, unless they are friendly societies.

This is in recognition of the Friendly Societies and Credit Union Act 1982, under which such insurers can form.

For similar reasons, we also recommend that clause 8 be amended to exclude from coverage voluntary professional and trade organ- isations providing some insurance-type services to their members.
Our proposed deletion of clause 7(3) would also provide exemptions to organisations offering discretionary benefits, which we consider should not be captured by the regime.

We propose the insertion of clause 8A, which would empower the Re- serve Bank to declare that a person was not carrying on an insurance business in New Zealand where the person entered into a one-off or occasional contract of insurance and the bill’s requirements would be unduly onerous.
This would allow the Reserve Bank to grant exemp- tions to persons entering into one-off insurance contracts that were secondary to their core business, which are not intended to be cap- tured.

After careful consideration, we recommend that declarations under this provision be subject to the Regulations (Disallowance) Act 1989, and recommend amendments to clause 228 accordingly.
While we are assured that the Reserve Bank would put appropriate restric- tions on the provision to ensure these declarations were not employed too widely, we consider that as they could cover a wide range of situ- 4 Insurance (Prudential Supervision) Bill Commentary ations and it involves a power in the nature of an exemption, it should therefore be subject to disallowance by Parliament.
We considered carefully requests for complete or partial exemption from various kinds of other insurers, such as captive insurers and incorporated societies, including those entities that, while owned or controlled by professional or trade associations, are first and fore- most insurance entities.
However, we acknowledge that the bill is intended to capture all kinds of insurers to ensure they are subject to the same rules, and believe that size, rather than corporate form, should be the relevant criterion for exemption in order to make the regime workable.

We therefore consider it would be inappropriate to exempt some forms of insurers and not others.
We are advised, however, that the three-year transition period avail- able to insurers upon enactment of the bill would allow such entities ample opportunity to make changes to their business, structure, or other arrangements to enable them to comply with the regime.

The Reserve Bank assured us that it would communicate with each in- surer affected by the legislation, and could provide advice to insurers on these issues, should they require it.
Treatment of overseas insurers operating in New Zealand We considered carefully the effect of the bill on New Zealand in- surers and overseas insurers, in response to concern that the pro- posed framework might unintentionally put New Zealand-owned in- surers at a disadvantage, and the suggestion that more consistency was needed with overseas jurisdictions’ prudential frameworks, par- ticularly that of Australia.
We are assured, however, that the regime proposed in the bill would not disadvantage New Zealand insurers.

In the bill as introduced, three clauses relate to exemptions for over- seas insurers operating branches in New Zealand.

Clause 36 allows the Reserve Bank to give exemptions in relation to “fit and proper” certificates for overseas directors, clause 60 allows exemptions from solvency standards, and clause 117 provides for exemptions from statutory fund requirements.
These exemptions would be granted only if insurers operating branches in New Zealand were subject in their “home” jurisdiction to regulation that met the standards of the Reserve Bank; their standards would also, taken as a whole, have to be equivalent to New Zealand’s.
Commentary Insurance (Prudential Supervision) Bill 5 Exemptions provided to overseas insurers in these circumstances would confer no advantages relative to New Zealand insurers, because standards or requirements in the original jurisdiction comparable with New Zealand’s would be a condition of such Indeed, the exemptions would simply ensure that no exemption.

duplication of regulation applied to overseas insurers operating in New Zealand.
We believe that the alternative—excluding overseas insurers entirely from the bill—would not be appropriate, as it would leave them with no regulatory oversight in New Zealand; this is contrary to the intention of the bill, and would be more likely to confer advantages on overseas insurers relative to New Zealand ones.

Excluding overseas insurers from selling insurance through their New Zealand branches would also reduce competition, and New Zealanders’ access to insurance.
We were advised that duplication of the Australian prudential framework in its entirety would be inappropriate, because New Zealand’s market has different requirements for supervision in some areas.

Nevertheless, New Zealand’s framework draws heavily on Australia’s in some aspects, because of the similarities between the two countries, the number of insurers undertaking business in both countries, and Australia’s well-developed prudential regime.
New Zealand’s framework would be tougher in some areas than Australia’s, but Australia’s would be tougher in others.

For example, it is proposed that the New Zealand regime have higher risk-weights for unlisted equity investments, while Australia has much higher minimum capital requirements.
Because of certain grounds for exemptions discussed earlier, there was concern that the bill might create ambiguity in some areas, for ex- ample regarding solvency standards, where the standard of an over- seas jurisdiction may be slightly lower than New Zealand’s, possibly causing uncertainty or unfairness.
However, we are assured by the Reserve Bank that it would make careful judgements when consid- ering these matters, and that the transition time for compliance with the legislation would allow enough flexibility for these issues to be resolved.

However, we recommend an amendment to the bill in relation to overseas insurers.
Because clause 18(1)(i) sets out criteria for the Reserve Bank to use to determine whether the home-jurisdiction pru- dential regulation and supervision of an overseas insurer was satis- 6 Insurance (Prudential Supervision) Bill Commentary factory, we consider that the regulations (made under clause 229) should prescribe in advance a list of overseas jurisdictions that are considered to regulate and supervise insurers satisfactorily to the level set out in the paragraph.
This amendment would reduce un- certainty for insurers, and make the process less costly and more straightforward.

The provisions in the bill as introduced could be interpreted to mean that the Reserve Bank would have to make a de- termination regarding the suitability of the jurisdiction in respect of each overseas insurer that applies for a licence, even when it had al- ready considered another applicant from the same jurisdiction.
We do not believe this would be an effective use of the Reserve Bank’s time and resources.

Similar amendments are also proposed to clauses 36(2A) and 117(2A).

Obtaining a licence We recommend some minor amendments to the provisions govern- ing the obtaining of an insurance licence.

We recommend amending clause 16 to make it clear that only bodies corporate carrying on or proposing to carry on an insurance business in New Zealand are eli- gible to apply for a licence.
This would make the criteria for licens- ing more explicit.

It would also prevent overseas insurers from using New Zealand registration as a shelter for their overseas activities.

We propose some small amendments to clause 18(1).

They would make it clear that the Reserve Bank must be satisfied that an appli- cant held capital of an amount specified in the solvency standard be- fore that applicant was entitled to a licence.
As one of the criteria for eligibility for a licence is a specified minimum amount of capital, we consider it important that the subclause refer to this requirement.

We also propose an amendment to subclause (1)(j) to ensure that in- surers that were not required to register under the Financial Service Providers (Registration and Dispute Resolution) Act 2008 would still be required to meet the standards set out in section 13(a) of that Act.
These standards are an important factor in licensing decisions, and we consider that they should therefore also apply to entities that are not covered by the Act.

We also recommend the removal of the refer- ence to section 13(b) of the Financial Service Providers Act, because it is not relevant.
Commentary Insurance (Prudential Supervision) Bill 7 Licence conditions We recommend amending clause 20 to ensure that a solvency mar- gin can be expressed in different ways, for example as an amount or as a ratio.

This amendment is aimed at ensuring the provisions are workable for insurers, and that they are as easy to apply as possible.

This clause is important because many of the thresholds for coercive action by the Reserve Bank relate to inability to maintain a solvency margin.
We consider this amendment would help make sure the pro- vision is effective.

We also recommend an amendment to clause 23(1) to clarify how and within what time a licensed insurer would have to inform the Reserve Bank if they believed they might fail to maintain a solvency margin.

In the bill as introduced, the requirements and related time- frame are unclear; it says that the Reserve Bank must be informed “as soon as practicable” if an insurer is likely to fail “at any future time”.
Accordingly, we propose the requirement that the Reserve Bank be informed as soon as reasonably practicable if a licensed insurer be- lieves a failure to meet a solvency margin is likely within the next three years.
Notifying the Reserve Bank before obtaining control or changing corporate form We recommend amendments to clauses 25 to 27 to clarify that the person who intended to obtain the control would be the person re- sponsible for informing the Reserve Bank about a change of control transaction, and to clarify what constitutes obtaining control.
We propose that the duty should apply if a person was to become the “holding entity” of the insurer (which draws on sections 5 to 8 of the Companies Act 1993) or would (either alone or with others) obtain control over 50 percent or more of the voting rights in the insurer.

The drafting of these clauses as introduced is unclear, especially as to who is the controlling owner and who must inform the Reserve Bank about the proposed change in control.
Fit and proper requirements We recommend removing the detail in clauses 32(4) and 34 and al- lowing it to be specified by deemed regulation.

Clause 32(4) includes the detailed requirements for assessing “fit and proper” persons, and 8 Insurance (Prudential Supervision) Bill Commentary clause 34 sets out some criteria for this purpose.

Allowing this to be specified by deemed regulation would avoid any undue inflexibility resulting from enshrining the detail in legislation.
Much of the de- tail of clause 34 is very prescriptive, and is more appropriate to be included in deemed regulations (“fit and proper standards”) where there is more scope for flexibility and variation.

We consider that these standards should be subject to the Regulations (Disallowance) Act.

Transfers and amalgamations We recommend an amendment to clause 44(1) to allow other suitably qualified persons to assist the Reserve Bank in making its assessment of a proposed transfer or amalgamation.
As introduced, the subclause refers only to an independent actuary.

While we consider that the opinion of an actuary would be the most relevant, we believe there would be merit in allowing other suitably qualified persons, such as accountants, to assist where the Reserve Bank considers it appropri- ate.
We also recommend an amendment to clause 45(1) to ensure it is clear that the Reserve Bank could obtain only reasonable costs from an insurer in relation to a report the bank had itself requested regard- ing approval for a transfer or amalgamation.

This should reassure insurers that costs in this area are not intended to be excessive.
Lastly, we recommend an amendment to clause 47 to specify a time limit for the Reserve Bank of 20 working days from the day all rea- sonably required information is received regarding transfer or amal- gamation applications.

We believe that the requirement to secure approval should not obstruct legitimate transfers or amalgamations.

No time limit is specified in the bill as introduced, and we believe that 20 working days should be sufficient.
Prudential regulations Solvency standards We recommend that clause 56 be widened to include some report- ing against matters in the solvency standards that are not covered by reports produced under the Financial Reporting Act 1993.

Broaden- ing these provisions to allow the standards to require reports relating to solvency would ensure that all matters relating to solvency were Commentary Insurance (Prudential Supervision) Bill 9 taken into account in reporting.
We also recommend that the clause be amended to allow the solvency standard to prescribe matters relat- ing to minimum capital.

Although the concept of minimum capital may be captured within the current formulation of solvency margin, our amendment would confirm this and provide the Reserve Bank with the means to impose solvency requirements.

Solvency stand- ards would be subject to the Regulations (Disallowance) Act.
We also recommend amending clause 56 to make it clear that the sol- vency standard could cover disclosure matters and some reporting to the Reserve Bank and others in relation to solvency matters, and that offences would apply to breaches of these requirements.

We con- sider this amendment necessary as the provision must encompass all matters that may be included in the solvency standard.
Because the Reserve Bank has completed substantial consultation on solvency standards, we also recommend that clause 228C, which requires such consultation before a solvency standard is issued, be amended to require consultation before the bill is passed to be treated as having been undertaken by the Reserve Bank for the purpose of this clause.

While we do not have responsibility for the content of the regula- tions, we urge the Reserve Bank to ensure that solvency standards are fair.
As explained earlier, solvency standards would be subject to the Regulations (Disallowance) Act.

To that end, we recommend the insertion of new subclauses 53(3A) and 53(3B) which require the Reserve Bank, before issuing a solvency standard, to have regard to relevant overseas standards.
Some of us consider this is the minimum necessary to provide some reassurance to New Zealand-based insurers that the Reserve Bank will be closely watching issues posed by differing solvency standards applicable to insurance companies not incorporated in New Zealand.

Financial strength ratings We recommend that clause 61(2)(b) be amended to clarify that the reference to insurance business carried on by a reinsurer means an insurance business in New Zealand.
We also recommend a number of other small amendments regard- ing financial strength ratings provisions.

We recommend that the bill be amended to require that a financial strength rating given by 10 Insurance (Prudential Supervision) Bill Commentary an approved ratings agency must refer to any overseas policyholder preference, as this is the intention.

We also recommend that clauses 64 and 65 be amended to allow disclosure of a rating by an insurer through an intermediary.
This would avoid further compliance costs and maintain continuity with the status quo.1 We also recommend that clauses 64 and 65 be amended to impose a maximum penalty of $100,000, rather than the maximum $500,000 set out in clause 71, for breaching either of the clauses.

We believe $500,000 is excessive and unwarranted in the context of the bill, and that $100,000 would be far more appropriate to these offences.

We also recommend two further amendments to clause 69.
We rec- ommend amending this clause to allow the insurer the option of us- ing public notice of ratings downgrades as an alternative to formal written notice to all policyholders, which is the only option in the bill as introduced.

We believe that this option could reduce compli- ance costs for insurers, while still ensuring that information relating to a change in rating was made public.
We also recommend that the clause be amended to clarify that the requirement to give notice of a public downgrade of a rating would apply to all contracts, not just those with a duration of more than one year.

This amendment would reflect the status quo under the Insurance Companies (Ratings and Inspections) Act 1994, and would be easier to comply with if our recommended amendment to allow public notice of a ratings down- grade were implemented.
Risk management plans We recommend an amendment to clause 73 to allow, in extreme mar- ket circumstances only, notification to the Reserve Bank of a change to an insurer’s risk management plan after the change has been made.

This amendment would require the insurer to notify the Reserve Bank as soon as possible after the change occurred, rather than to have the change pre-approved.
We considered submissions advocating the removal of the requirement that the Reserve Bank pre-approve any change to a risk management plan; however, regulatory awareness and pre-approval of plans are important components of the pruden- tial framework; in addition, such a move would open up the possi- 1 This position existed under the Insurance Companies (Ratings and Inspec- tions) Act 1994.

Commentary Insurance (Prudential Supervision) Bill 11 bility of unwinding poorly-founded risk positions.
Nonetheless, we are aware that in extreme circumstances immediate action on a plan could be needed, so we consider that the bill should provide for flex- ibility for an insurer to act quickly.

Our proposed amendment would do so, while retaining the requirement for pre-approval in all other circumstances.

Appointment of actuary and actuarial review We recommend amending clause 76(3) to allow insurers more time to appoint a new actuary if the Reserve Bank allows an extension.
The clause as introduced allows six weeks for an insurer to make the new appointment; however, we believe that this should be extended to al- low flexibility where an insurer could not meet the six-week deadline for good reason.

Finally, we recommend the deletion of clause 79(2), which requires the auditor’s report to indicate the degree of reliance that has been placed on the actuarial report.
We believe that this subclause might be misunderstood as a qualification of the auditor’s opinion, and could therefore affect how the auditor’s report was viewed.

Supply of financial statements We recommend amendments to clause 81 to clarify some drafting issues.

We recommend the insertion of new subclause 2A to make it clear that the definition of “subsidiaries” refers to the definition in section 2(1) of the Financial Reporting Act.
We also recommend that subclause (3) be amended to require interim financial statements to be prepared according to generally accepted accounting practice (GAAP)—that is, the same way that yearly financial statements are prepared.

The bill as introduced provides an option of using a basis other than GAAP, which we consider should be removed.
Statutory funds of life insurers General requirements We recommend a number of amendments to clause 84 to ensure con- sistency in the terminology used throughout the bill.

Our amend- ments would replace the word “policyholder” in subclauses (1)(d)(ii) and (iii) with “insured person”.

This would also clarify that the in- 12 Insurance (Prudential Supervision) Bill Commentary tended focus of the clause is on an insured person, rather than a pol- icyholder.
Further, we recommend that the phrase “specified sick- ness” in subclause (3)(b)(ii) be replaced with the phrase “stated con- dition or disease” for consistency with subclause (1)(d)(iii).

We recommend a further amendment to clause 84(1) to correct an omission.

We propose including investment account contracts in the definition of a life policy, as such contracts are still in existence and so should be captured by the bill.
We recommend that clause 85 be amended to ensure that classifica- tion of composite policies into life and non-life policies is applied on a class of contract basis and according to the premium apportionment at the commencement of a contract.

This amendment would allow these clauses to be applied more consistently.

We recommend an amendment to clause 90(6) to change the tran- sition time for insurers.
Clause 90(6) provides that during the six months from the commencement of the clause, subclause (1) (which specifies that a policy document must identify the statutory fund or funds to which a life policy is referable) would not apply to a policy document relating to a life policy issued before the commencement of the clause.

To ease the transition for insurers, we consider that the period should be increased to 12 months, so that insurers could capture every policy in their annual cycle.
We also recommend amendments to clause 97 of the bill, which re- lates to the limit of certain liabilities regarding investment perform- ance guarantees.

This clause is copied from Australian legislation, and is highly technical.

We are aware of concern that the provision is difficult to interpret in places, and that some aspects of it are un- certain.

We consider it appropriate to enable regulations to be made providing this detail, rather than providing it in primary legislation.
We propose one other amendment to clause 103(10).

To provide assurance and clarity for directors, we consider that it should be made clear that compliance with directors’ duties to life policyhold- ers would not put a director in breach of any other duty under the Companies Act or related obligations.
Commentary Insurance (Prudential Supervision) Bill 13 Transfer of assets on establishment of statutory funds To rectify an omission, we recommend that new clauses 88A and 91(ab) be inserted to provide for the transfer of assets upon the es- tablishment of a statutory fund.
Application of statutory fund assets on liquidation or winding up We recommend an amendment to clause 114(4) to allow the allo- cation of funds of an insolvent life insurer by direction of the High Court in cases where the statutory fund is insufficient to meet policy- holder liabilities in full.

In the bill as introduced, no direction is given for such situations; we consider it important to clarify this point to ensure certainty about the process if the situation arises.
Prudential supervision Disclosure of information by auditors and actuaries We recommend two amendments to clause 125.

For practical rea- sons, we recommend extending the clause to require past as well as present office-holders to disclose information about an insurer’s sol- vency and whether it may be operating fraudulently.

We also recom- mend replacing references in the clause to “insolvency” with refer- ences to “failing to maintain a solvency margin”.
This would link the clause clearly to the solvency margin imposed by condition of licence, as originally intended, rather than to actual solvency.

Confidentiality of information We recommend amending clause 133 to ensure consistency between its subclauses.

As introduced, subclause (1) refers to “information, data or forecasts”, and (2) refers only to information or data.

We consider that the clause should be amended to refer consistently to data, information, forecasts, and documents.
This amendment would also tighten up the confidentiality protections covering commercially sensitive information provided to the Reserve Bank.

14 Insurance (Prudential Supervision) Bill Commentary Distress management Recovery plans We recommend amendments to clause 141 to require the Reserve Bank to consider whether a recovery plan should be requested in the particular circumstances before issuing a direction.
This amendment would reflect the intention that a recovery plan should often be the first step in the distress management process, which can later be es- calated to issuing directions or more serious measures.

Because the Reserve Bank may need to act quickly in crises, however, we do not believe recovery plans should be a mandatory first step in the process.

Directions We recommend amending clause 142 so that various paragraphs in subclauses (1) and (2) are better aligned.
These subclauses appear to contradict each other in the bill as introduced, as subclause (1)(d), for example, states that a direction may require a licensed insurer to cease to carry on its business or any part of its business, while subclause (2) instructs that a direction must not require the licensed insurer to cease to enter into contracts of insurance by way of renewal of contracts that were originally entered into before the direction was given.
We therefore propose that subclause (2) begin with “However”, rather than “A”, to make it clear that subclause (1) is subject to subclause (2).

Other matters Other definitions For clarification purposes, we recommend an amendment to clause 6 to make it clear that the financial strength rating refers only to the ability to meet liabilities under contracts of insurance.
We are aware that there is some confusion over whether a financial strength rating refers to all liabilities rather than insurance policy liabilities only, so we consider that this clause needs to make it clear that the rating requirement is for financial strength and not for a credit rating.
Miscellaneous provisions We recommend a number of small amendments to the provisions re- lating to Lloyd’s (clauses 198 to 208) to clarify the respective obli- Commentary Insurance (Prudential Supervision) Bill 15 gations of Lloyd’s and Lloyd’s underwriters under the bill, to ensure that they can comply with the bill, and to allow Lloyd’s to be given a temporary licence pending the consideration of an application for a full licence.
We also recommend that the provisions governing the application of the bill to Lloyd’s include a caveat in clause 203A(4) stating that Lloyd’s licence can be cancelled if it persistently or ser- iously breaches its obligations under the bill.

The bill needs to in- clude appropriate mechanisms to promote compliance by all insur- ers, including Lloyd’s.

We consider that, in the case of Lloyd’s, can- cellation is an appropriate mechanism.
For similar reasons, we also consider that the bill should specify that there would be a sanction against Lloyd’s if a Lloyd’s underwriter were to enter into new in- surance contracts in New Zealand following a direction under clause 205 not to do so.
We also recommend amending clause 217 to make it clear that if an insurer had a prohibited provision in its constitution allowing it to act in the best interests of its holding company even though it may not be in the best interests of the insurer, this is not deemed to be an offence, and deleting subclause (4) (detailing the fine for non- compliance).

Clause 217 states that it is an offence for an insurer to have such a provision in its constitution.
We consider that it would be better for non-complying insurers that the offending provision in their constitution should have no legal effect.

This clause should also make it clear that it would apply only to New Zealand-incorporated companies.

Finally, we recommend amending clause 236 to include a reference to the ratings provisions in the bill as well as certain requirements under the Financial Reporting Act.
The clause provides that provisional li- cence holders are required to comply with the requirements referred to in the clause only to the extent that the provisional licence condi- tions require compliance.

Ratings provisions and certain Financial Reporting Act requirements are not included in this clause as intro- duced, meaning that insurers would have to be fully compliant with those requirements 18 months after the bill’s enactment.
We consider that including the ratings and financial reporting requirements in this clause would make the transitional arrangements more flexible and avoid potential difficulties during this period.

16 Insurance (Prudential Supervision) Bill Commentary Transitional matters We recommend the insertion of subclause 229(1)(pa) to allow tran- sitional provisions to be made for the coming into force of the statu- tory funds provisions in the bill (subpart 3 of Part 2).
This would ensure that any unexpected consequences of the complexity of these provisions could be resolved.

We recommend that this subclause be subject to a “sunset clause” limiting its existence to three years.

We also recommend amending the transitional provisions to allow insurers to request approval from the Reserve Bank for a portfolio transfer with another insurer in the 18-month period following the enactment of the bill, before they would have received full or provi- sional licences.
We consider this amendment necessary to maximise the time available for an insurer to change its business structure to meet the standards expected under the legislation.

Commentary Insurance (Prudential Supervision) Bill 17 Appendix Committee process The Insurance (Prudential Supervision) Bill was referred to us on 8 December 2009.

The closing date for submissions was 10 February 2010.

We received and considered 57 submissions from interested groups and individuals.

We heard 31 submissions.


We received advice from the Reserve Bank of New Zealand.
Committee membership Craig Foss (Chairperson) Amy Adams David Bennett John Boscawen Brendon Burns Hon David Cunliffe Aaron Gilmore Raymond Huo Rahui Katene Peseta Sam Lotu-Iiga Stuart Nash Dr Russel Norman David Clendon replaced Dr Russel Norman from 19 April 2010 Insurance (Prudential Supervision) Bill Key to symbols used in reprinted bill As reported from a select committee text inserted unanimously text deleted unanimously Hon Simon William English Insurance (Prudential Supervision) Bill Title Commencement Government Bill Contents Part 1 Preliminary provisions Purposes and principles Purposes Principles to be taken into account under this Act Overview Overview Interpretation Interpretation Meaning of contract of insurance Meaning of carrying on insurance business in New Zealand Bank may declare that person is not carrying on insurance business in New Zealand in certain circumstances Meaning of associated person and holding entity Application of Act to friendly societies and credit unions Bank’s functions Bank’s functions under Act Bank must have regard to directions about Government policy objectives 95—2 Page 13 13 13 14 15 15 23 25 27 28 28 28 29 1 8A 9 10 11 12 Insurance (Prudential Supervision) Bill 13 Act binds the Crown Act binds the Crown Part 2 Licensing and prudential regulation of insurers Subpart 1—Licensing of insurers Requirement to be licensed Persons that carry on insurance business in New Zealand must be licensed Offence for person who is not licensed insurer to hold itself
 out to be licensed insurer Process for obtaining licence Application for licence as insurer Applicant must provide fit and proper policy, fit and proper certificate, and risk management programme Entitlement to licence Carrying on business in prudent manner Conditions of licence Conditions of licence Bank may modify conditions of licence Offence to fail to comply with conditions of licence Licensed insurer must report likely failure to comply with solvency margin imposed under licence conditions Notification
 of decision 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 Bank must be notified before control is obtained Bank must be notified before corporate form is changed Bank must consider whether it is still satisfied as to licensing matters Offence to fail to notify or provide information Cancellation of licence Cancellation of licence Assignment of liabilities to enable cancellation Bank’s approval of assignment Effect of assignment 26 27 27A 28 29 30 31 2 29 30 30 30 31 32 34 35 36 37 37 38 39 40 40 41 41 43 44 44 Insurance (Prudential Supervision) Bill Fit and proper requirements Licensed insurer must be subject to fit and proper policy for directors and relevant officers Group fit and proper policy Fit and proper standards Licensed insurer must provide fit and proper certificate for new directors or relevant officers or if Bank requires certificate Bank may exempt overseas insurers from compliance with section 35(1) Power to remove directors and relevant officers How power to remove is exercised Former director or relevant officer must not accept reappointment in breach of direction Appeals from Bank’s decision Appeal to Court of Appeal on question of law Transfers and amalgamations Transfers and amalgamations must be approved Request for approval Actuarial or other report on transfer or amalgamation proposal Costs of
 report Bank must have regard to certain matters in considering request Bank’s decision on approval Offence to fail to comply with conditions of approval Requirement for approval is in addition to requirements under other enactments Transfer or amalgamation not invalidated Effect of assignment for purposes of approved transfer Publication of policies Publication of policies Subpart 2—Prudential regulation of insurers Solvency standards Bank may issue solvency standards Matters that may be contained in
 solvency standards Offence to fail to comply with reporting and disclosure requirements Incorporation by reference Bank may exempt overseas insurers from compliance Insurance (Prudential Supervision) Bill Financial strength ratings Licensed insurer must have current financial strength rating Financial strength rating must refer to overseas policyholder preference Bank may approve rating agencies Licensed insurer must notify Bank of change in rating or credit watch warning Disclosure of current rating to policyholder Disclosure by insurers not required to be rated Policyholder may cancel if disclosure is not made Disclosure of rating on licensed insurer’s Internet site Other advertising of ratings Licensed insurer must give public notice of downgrade or notice to policyholders Licensed insurer must not disclose or advertise ratings from non-approved agencies Offence to fail to comply with disclosure obligations Disclosure of overseas policyholder preference Overseas insurer must disclose overseas policyholder preference Risk management Licensed insurer must be subject to and comply with risk management programme Group risk management programme Offence to fail to comply with risk management requirements Appointment of actuary and actuarial review Requirement for licensed insurers to have appointed actuary Review of
 actuarial information in, or used in the preparation of, financial statements Appointed actuary’s report Provisions relating to auditor’s report Access to information Supply of financial statements Financial statements must be given to Bank 63 64 64 65 66 66 67 68 68 69 70 70 70 71 72 73 73 73 74 75 75 76 61 61A 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 4 Insurance (Prudential Supervision) Bill Subpart 3—Statutory funds of life insurers General requirements Requirement that life insurer
 have statutory funds Overview of requirements regarding statutory funds Meaning of life policy Composite policies Interpretation in this subpart Duty of life insurer in relation to statutory funds Notice to Bank when fund established Life insurer must transfer assets on establishment Assets of statutory fund Identification of life policies referable to statutory fund Payments to statutory fund Capital payments to statutory funds Expenditure and application of statutory fund Prohibition of reinsurance between funds Effect of non-compliance with section 93: general Effect of non-compliance with section 93: certain classes of transactions Investment performance guarantee: limit of certain liabilities Investment of statutory funds Recording of restricted investments Transfer of assets between funds Restriction on restructure or termination of statutory funds Ascertainment of income and outgoings of statutory fund Duties and liabilities of directors, etc Duty of directors in relation to statutory funds Bank may give notice Liability of directors Bank’s power to sue in name of life insurer Restructure and termination of statutory funds Restructure of statutory funds Termination of statutory funds Additional requirements for transfer of life policies between statutory funds by endorsement Additional requirements for transfer of life policies between statutory funds by endorsement 82 83 84 85 86 87 88 88A 89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109
Insurance (Prudential Supervision) Bill Allocation of profits and losses and of capital payments and distribution of profits and capital Life insurer must allocate operating profits and losses in accordance with prescribed requirements Allocation of capital Distribution of retained profits Distribution of shareholders’ or members’ capital Application of statutory fund assets on liquidation or winding up Application of
 statutory fund assets 110 111 112 113 114 Liability of directors for loss to statutory fund 115 Liability of directors for loss to statutory fund 116 Offence to fail to comply with subpart Offence 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 Supply of information by licensed insurers for purposes of prudential supervision Notice may require supply of information, data, or forecasts in relation to associated persons Associated persons may be required to supply information to licensed insurers Supply of information by other persons for purposes of prudential supervision Requirement that information, data, or forecasts be audited or reviewed Bank may require report relating to licensed insurers or associated persons Disclosure of information to Bank by auditors and actuaries Auditor or actuary to inform of intention to disclose Protection of auditors and actuaries 119 120 121 122 123 124 125 126 127 6 97 97 97 98 98 100 101 101 102 102 103 103 104 104 105 105 106 106 Insurance (Prudential Supervision) Bill Investigations Investigations Power to obtain information or documents Power to enter and search place Offences in relation to investigations Effect of final decision that exercise of powers under sections 128 and 129 unlawful Miscellaneous provisions Confidentiality of information, data,
 documents, and forecasts Limits on further disclosure of information, data, documents, or forecasts Application of other enactments to information, data, documents, or forecasts published or disclosed under section 133 Part 4 Distress management Subpart 1—Recovery plans Bank may require licensed insurer to prepare recovery plan Recovery plan must be provided to Bank for approval Licensed insurer must comply with recovery plan Amendments to recovery plan Offence to fail to comply with recovery plan requirements
 Subpart 2—Directions to licensed insurers and associated persons 128 129 130 131 132 133 134 135 136 137 138 139 140 Bank may give directions to licensed insurer Scope of directions to licensed insurer Bank may give directions to associated person Scope of directions to associated person 141 142 143 144 145 Miscellaneous matters relating to directions 146 147 Offence to contravene directions Power to remove, replace, or appoint directors, auditor, or actuary Offence to disclose giving of direction or notice 148 106 107 108 109 109 110 111 112 113 114 115 115 115 115 116 117 118 118 118 119 120 7 Insurance (Prudential Supervision) Bill Subpart 3—Liquidation 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 Bank may apply for liquidation of insurers Bank may apply for High Court to reduce value of contracts of insurance Bank may apply for voluntary administration of licensed insurers Bank’s approval for voluntary liquidation or appointment of administrator by company Bank’s approval for voluntary liquidation or appointment of administrator by company Bank’s participation in insolvency procedures and certain other proceedings Bank may make certain applications in respect of voluntary administration or liquidation and appear and be heard in proceedings Bank’s participation in arrangements, amalgamations, and compromises under Companies
 Act 1993 Bank must be sent copy of applications under Parts 14 to 16 of Companies Act 1993 Bank must be sent copies of certain documents and may inspect certain accounts and records Attendance of representative of Bank at certain meetings for insurer in voluntary administration, subject to deed of company arrangement, or in liquidation Bank may require meeting of creditors or shareholders to appoint liquidation committee Special insolvency provisions for insurers High Court may reduce value of contracts
 of insurance High Court may require actuarial report Continuation of life policies if insurer in liquidation Liquidator or deed administrator may apply to High Court for approval of scheme of transfer of insurance business Right to attend and be heard Approval of scheme Effect of approval Insurance (Prudential Supervision) Bill Application by Bank for directions to liquidator, administrator, or deed administrator Valuation of policies by liquidator or deed administrator Subpart 4—Statutory management Commencement of statutory management Statutory management of licensed insurers and associated persons Statutory management of overseas persons Date and time of appointment Grounds on which licensed insurer may be declared to be subject to statutory management Grounds on which associated person may be declared to be subject to statutory management Bank must give notice of recommendation Application of this subpart to joint statutory managers, associated persons, and subsidiaries Continuation of statutory management of companies restored to New Zealand register Exercise of powers Considerations affecting exercise of powers by statutory manager Statutory manager to comply with directions of Bank Application of Corporations (Investigation and Management) Act 1989 Application of Corporations (Investigation and Management) Act 1989 Act
 does not limit application of Corporations (Investigation and Management) Act 1989 166 167 168 169 170 171 172 173 174 175 176 177 178 179 Power to obtain documents and information 180 Powers to obtain documents and information Sales and dispositions 181 182 Sale requires Bank’s approval Consents not required under other enactments Body corporate may be formed to acquire branch of overseas person 183 184 Statutory manager may form body corporate to acquire business of branch of overseas person Vesting of
 property subject to security 130 131 132 132 133 133 134 135 135 136 136 136 137 138 139 139 139 140 141 9 Insurance (Prudential Supervision) Bill 185 186 Proof of vesting Provisions applying if liabilities included in sale Obligations incurred by statutory manager 187 Obligations incurred by statutory manager 188 189 190 191 192 193 194 195 196 197 198 199 200 Value of contracts of insurance Statutory manager may value policies Value of contracts of insurance may be reduced by Order in Council Auditor, actuary, and annual financial statements and records Appointment of auditor and actuary Prior auditor or actuary ceases to hold office Removal of auditor or actuary Annual financial statements Annual report by statutory manager Termination of statutory management Termination of statutory management by Order in Council Termination of statutory management on liquidation Time of termination Part 5 Miscellaneous provisions Provisions relating to Lloyd’s Lloyd’s underwriters must not carry on insurance business in New Zealand unless Lloyd’s holds licence Lloyd’s may apply for licence on behalf of underwriting members Lloyd’s fit and proper policy and risk management programme 200A Bank must issue temporary licence to Lloyd’s pending consideration of its application Lloyd’s underwriters may carry on insurance business in New Zealand if Lloyd’s holds licence Issue of licence to Lloyd’s Conditions of Lloyd’s licence 202 203 203A Obligations on Lloyd’s 204 Provisions that
 do not apply in respect of Lloyd’s or Lloyd’s underwriters Bank may direct that Lloyd’s underwriters must not issue or renew contracts of insurance 201 205 10 141 142 142 142 143 143 144 144 144 145 145 146 146 146 147 147 148 148 150 151 151 152 152 Insurance (Prudential Supervision) Bill Agent of Lloyd’s and address for service Lloyd’s to give notice of enactments and bylaws 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 Access to information by overseas supervisor Duties of person on receipt of notice under section 209 Offences False declarations and representations Liability of directors Defence for offences against this Act Prohibition against falsely holding out New Zealand connection Prohibition against falsely holding out New Zealand connection Certain New Zealand persons and overseas companies prohibited from using certain words in name Prohibition does not apply in certain cases Restriction on insurer’s constitution 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 Power to ban certain persons from participating in insurance business Notice of hearing Appeals to High Court Appeal to Court of Appeal on question of law Register of banned persons Search of register Offence for banned person to participate in insurance business in breach of order 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 Notice and service of documents Notice and service Protection from liability and indemnity 226 227 Protection from liability Indemnity 153 153 154 154 155 155 156 156 157 157 158 159 160 161 162 162 162 163 163 164 165 165 11 Insurance (Prudential Supervision) Bill 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 229A Regulations may provide for exemptions Regulations Repeals and consequential amendments Amendments to Life Insurance Act 1908 Repeals Amendments to other enactments 230 231 232 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 Bank may also issue provisional licence for insurer that is or will be in run-off Duration of provisional licence Provisional licence holder only required to comply with requirements to extent required by conditions Conditions of licence Public Trust must return deposits 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 234 235 236 237 238 239 12 166 167 168 168 168 169 173 173 174 174 174 174 175 176 176 176 177 178 179 181 185 Insurance (Prudential Supervision) Bill Part 1 cl 3 Schedule 3 Consequential amendments 206 The Parliament of New Zealand enacts as follows: 1 2 (1) (2) Title This Act is the Insurance (Prudential Supervision) Act 2009.
Commencement Section 1, this section, Part 1, sections 34, 42 to 59 58, 62, 102, 199 to 208, 211 to 213, 225 to 229A, 232(1), and 5 233 232B to 239, Schedule 1, and Part 1 of Schedule 3 come into force on the day after the date on which this Act receives the Royal assent.
Sections 16 to 31, 60, and 117 come into force on the earlier of the following: (a) the day that is 18 months after the date on which this Act receives the Royal assent: a date appointed by the Governor-General by Order in Council; and 1 or more orders may be made bringing different provisions into force on different dates.

(b) (2A) Section 232A comes into force on the day that is 3 years after the date on which this Act receives the Royal assent.
The rest of this Act comes into force on the day that is 18 months after the date on which this Act receives the Royal assent.

(3) Part 1 Preliminary provisions Purposes and principles 3 (1) (2) Purposes The purposes of this Act are to— (a) promote the maintenance of a sound and efficient insur- ance sector; and promote public confidence in the insurance sector.
(b) Those purposes are achieved by— 13 10 15 20 25 Part 1 cl 4 Insurance (Prudential Supervision) Bill (a) (b) (c) (d) establishing a system for licensing insurers; and imposing prudential requirements on insurers; and providing for the supervision by the Reserve Bank of New Zealand (the Bank) of compliance with those re- quirements; and conferring certain powers on the Bank to act in respect of insurers in financial distress or other difficulties.
5 Principles to be taken into account under this Act In achieving the purposes of this Act, the Bank must take into account the following principles that are relevant to the per- 10 formance of functions or duties imposed, or the exercise of powers conferred, on the Bank by this Act: (a) the importance of insurance to members of the public in terms of their personal or business risk management: the importance of maintaining the sustainability of the 15 New Zealand insurance market: the importance of dealing with an insurer in financial distress or other difficulties in a manner that aims to— adequately protect the interests of its policyhold- (i) ers and the public interest; and ensure that any failure, or possible failure, of the insurer does not have the potential to signifi- cantly damage the financial system or the econ- omy of New Zealand: (ii) 20 the importance of recognising— (i) that it is not a purpose of this Act to eliminate all risk of insurer failure; and that members of the public are responsible for their own decisions relating to insurance: (ii) 25 the desirability of providing to the public adequate in- 30 formation to enable members of the public to make those decisions: the desirability of consistency in the treatment of simi- lar institutions (while recognising that the New Zealand insurance market comprises a diversity of institutions): 35 the need to maintain competition within the insurance sector: the need to avoid unnecessary compliance costs: (b) (c) (d) (e) (f) (g) (h) 4 14 Insurance (Prudential Supervision) Bill Part 1 cl 6 (i) (j) the desirability of sound governance of insurers: the desirability of effective risk management by insur- ers.
Overview 5 5 (1) Overview In this Act,— (a) 10 this Part deals with preliminary matters, including pur- poses, principles, interpretation, the Bank’s functions under this Act, and the application of this Act to the Crown: Part 2 contains provisions relating to the licensing and prudential regulation of insurers: Part 3 contains provisions relating to the prudential supervision of insurers: Part 4 contains provisions relating to distress manage- 15 ment, including provisions relating to recovery plans, directions, liquidation or voluntary administration of in- surers, and statutory management: Part 5 contains miscellaneous provisions, ing provisions relating to Lloyd’s, offences, banning 20 orders, regulations, consequential amendments, and transitional arrangements.
includ- (b) (c) (d) (e) (2) This section is only a guide to the general scheme and effect of this Act.
6 (1) Interpretation 25 Interpretation In this Act, unless the context otherwise requires,— accounting period, in relation to an insurer, means a year end- ing on a balance date of the insurer and, if, as a result of the date of the formation or incorporation of the insurer or a change of 30 the balance date of the insurer, the period ending on that date is longer or shorter than a year, that longer or shorter period is an accounting period actuary means a person who is— (a) a Fellow of the New Zealand Society of Actuaries In- 35 corporated; or 15 Part 1 cl 6 Insurance (Prudential Supervision) Bill (b) the holder of an equivalent professional qualification approved by the Bank by notice to an insurer administrator means an administrator under Part 15A of the Companies Act 1993 applicant means a body corporate that has applied for a li- 5 cence appointed actuary, in relation to an insurer,— (a) means a person holding an appointment by the insurer (b) (c) (d) under section 76(1); and includes a person holding an appointment by the insurer 10 under section 76(2) that is acting because the person appointed under section 76(1) is unable to act; and includes a person appointed as an actuary by the Bank under section 147; and includes a person appointed as an actuary by a statutory 15 manager under section 190 approved rating agency means a rating agency approved by the Bank under section 62 associated person has the meaning set out in section 9(2) Bank means the Reserve Bank of New Zealand constituted 20 under the
 Reserve Bank of New Zealand Act 1989 Bank’s Internet site means an Internet site maintained by, or on behalf of, the Bank captive insurer means an insurer that— (a) is a subsidiary of an entity that is not an insurer (the 25 parent); and only insures risks of the parent or of other subsidiaries of the parent (or both) (b) carries on insurance business in New Zealand has the mean- ing set out in section 8 chief executive officer means a person occupying the position of chief executive officer by whatever name
 called chief financial officer means a person occupying the position of chief financial officer by whatever name called condition,— (a) in relation to a licensed insurer, means any condition of its licence; and 30 35 16 Insurance (Prudential Supervision) Bill Part 1 cl 6 (b) in relation to Lloyd’s or a Lloyd’s underwriter, means any condition of the licence issued to Lloyd’s under section 200A or 202 15 10 (b) contract of insurance has the meaning set out in section 7 current financial strength rating means a financial strength 5 rating that, in relation to a date on which an insurer is required to have a rating, was given not earlier than 1 year before that date deed administrator has the same meaning as in section 239B of the Companies Act 1993 deed of company arrangement has the same meaning as in section 239B of the Companies Act 1993 direction means any direction given by the Bank under this Act or the regulations director means— (a) a person occupying the position of director by whatever name called: in the case of an entity that does not have directors as such, any trustee, manager, or other person who acts in relation to that entity in the same or a similar fashion as 20 a director would act were that entity a company incorp- orated in New Zealand under the Companies Act 1993 document has the same meaning as in section 4(1) of the Evi- dence Act 2006 failing to maintain a solvency margin, in relation to an in- 25 surer, means that the insurer is failing to
 comply with a condi- tion of its licence imposed under section 20(2)(b) or (c) financial statements has the same meaning as in section 8 of the Financial Reporting Act 1993 financial strength rating,— (a) in relation to an insurer other than a Lloyd’s underwriter, means a rating that indicates the ability of the insurer to meet its liabilities (including liabilities under contracts of insurance) as they fall due: in relation to a Lloyd’s underwriter, means a rating ob- 35 tained by Lloyd’s that applies to the
 Lloyd’s market (b) 30 fit and proper standard means a fit and proper standard is- sued under section 34 17 Part 1 cl 6 Insurance (Prudential Supervision) Bill governing body means,— (a) (b) in relation to a body corporate, the board of directors (or other persons or body exercising powers of manage- ment, however described) of the body corporate: in relation to a partnership or other unincorporated body 5 of persons, either— (i) the board of directors (or other persons or body exercising powers of management, however de- scribed) of the partnership or other unincorpor- ated body of persons; or if there is no board or other persons or body as described in subparagraph (i), the partners of the partnership or members of the unincorporated body of persons (ii) 10 Governor means the Governor of the Bank appointed under 15 the Reserve Bank of New Zealand Act 1989 group financial statements has the same meaning as in sec- tion 9 of the Financial Reporting Act 1993 health insurance means insurance against a liability to pay fees or charges relating to the provision of a health service 20 (within the meaning of section 5(1) of the Health Practitioners Competence Assurance Act 2003) holding entity has the meaning set out in section 9(3) home jurisdiction means,— (a) in relation to an overseas person that is a body corporate, 25 the jurisdiction in which that body is incorporated: in relation to a Lloyd’s underwriter, the United King- dom (b) insurance intermediary means a
 person— (a) who, for reward, arranges contracts of insurance in New 30 Zealand or elsewhere; and (b) who does so as the employee of or agent for 1 or more insurers or as the agent of the policyholder insurer means a person by whom or on whose behalf the risk or part of the risk to which a contract of insurance relates is 35 accepted investigator means a person appointed under section 128(2)(b) 18 Insurance (Prudential Supervision) Bill Part 1 cl 6 includes a provisional licence licence— (a) means a licence
 issued under Part 2; and (b) licensed insurer— (a) means a person that holds a licence; and (b) includes— (i) (ii) a person that holds a provisional licence; and a Lloyd’s underwriter that is treated as being a licensed insurer under section 201 5 life insurer means a licensed insurer that issues, or is liable 10 under, life policies life insurer— (a) means a licensed insurer that issues, or is liable under, (b) life policies; and includes a Lloyd’s underwriter that issues, or is liable 15 under, life policies and is treated as being a licensed insurer under section 201 20 life policy has the meaning set out in section 84 Lloyd’s means the society of that name incorporated by the Imperial Act known as the Lloyd’s Act 1871 Lloyd’s underwriter means an underwriting member of Lloyd’s Minister means the Minister of the Crown who, under the au- thority of any warrant or with the authority of the Prime Min- ister, is for the time being responsible for the administration of 25 this Act New Zealand chief executive officer, in relation to an over- seas insurer, means— (a) the most senior officer of the insurer who is ordinarily resident in New Zealand; or another person who may be nominated by the insurer and is agreed to in writing by the Bank (b) 30 New Zealand chief financial officer, in relation to an overseas insurer, means— (a) the most senior officer of the insurer who is ordinarily 35 resident in New Zealand (other than the New Zealand chief executive officer) who
 is responsible for the ac- 19 Part 1 cl 6 Insurance (Prudential Supervision) Bill 5 (b) counting and financial reporting obligations of the in- surer; or another person who may be nominated by the insurer and is agreed to in writing by the Bank New Zealand policyholder means a policyholder— who is ordinarily resident in New Zealand; or (a) (b) that is incorporated or formed in New Zealand operating fraudulently or recklessly has the meaning set out in subsection (3) ordinarily resident in New Zealand has
 the meaning set out 10 in subsection (4) overseas company means a body corporate that is incorpor- ated outside New Zealand overseas insurer— (a) means an insurer that is an overseas person; and (b) includes a Lloyd’s underwriter that is treated as an over- seas being a licensed insurer under section 201 15 overseas person means— (a) (b) a body corporate incorporated outside New Zealand; or an unincorporated body that has its head office or prin- 20 cipal place of business outside New Zealand (b) overseas policyholder preference means, in relation to an overseas insurer, a law or regulatory requirement of the over- seas insurer’s home jurisdiction that— (a) relates to the recognition and priorities of claims of 25 creditors or classes of creditors in the event of the in- surer’s insolvency; and has the effect, directly or indirectly, of— (i) giving a material preference to policyholders in the insurer’s home jurisdiction as compared to 30 other policyholders; or otherwise being materially disadvantageous to New Zealand policyholders as compared to pol- icyholders in the insurer’s home jurisdiction (ii) overseas supervisor means any authority or body in any coun- 35 try other than New Zealand that performs functions in relation to insurers that correspond with, or are similar to, those con- ferred on the Bank under this Act 20 Insurance (Prudential Supervision) Bill Part 1 cl 6 policyholder— (a) means a person who has entered into a contract of in- (b) surance with an
 insurer; and includes any person claiming by, through, or under any policyholder (whether by assignment or otherwise) 5 10 premium includes any money or other consideration that is in substance a premium (regardless of what it is called in the contract) provisional licence means a licence issued under section 233 or 234 regulations means regulations in force under this Act reinsurance means insurance under which an insurer indem- nifies another insurer (the cedent) against losses on 1 or more contracts of
 insurance entered into by the cedent related party, in relation to an insurer, means any of the fol- 15 lowing: (a) (b) an associated person of the insurer: a director or relevant officer of the insurer or any other person occupying a position that allows the person to exercise significant influence over the management or 20 administration of the insurer: a relative of a person referred to in paragraph (a) or (b): a director of an associated person of the insurer: a person who owns, or in any way has the power to 25 control (whether directly or indirectly), or has the right to acquire, 10% or more of the voting rights of in the insurer: a person who has control (whether directly or indirectly) or significant influence over 25% or more of the com- 30 position of the governing body of the insurer (c) (d) (e) (f) relative has the same meaning as in section 2(1) of the Com- panies Act 1993 relevant officer, in relation to an insurer, means a person who occupies any of the following positions in respect of the in- 35 surer: (a) in the case of an overseas insurer,— (i) New Zealand chief executive officer: 21 Part 1 cl 6 Insurance (Prudential Supervision) Bill (b) an the appointed actuary: (ii) New Zealand chief financial officer: (iii) in any other case,— (i) (ii) (iii) chief executive officer: chief financial officer: an the appointed actuary 5 serious wrongdoing means an act, omission, or course of con- duct that— (a) (b) is misleading or deceptive; or involves the
 unlawful or corrupt use of the funds or re- 10 sources of an entity; or constitutes an offence that is punishable by imprison- ment for a term of 2 years or more; or is oppressive, improperly discriminatory, or grossly negligent, or that constitutes gross mismanagement; or otherwise reflects adversely on a person’s competence, diligence, judgement, honesty, or integrity (c) (d) (e) 15 20 solvency standard means a standard issued under section 53 statutory fund means a statutory fund maintained under sub-
 part 3 of Part 2 subsidiary means a subsidiary within the meaning of sections 5 to 8 of the Companies Act 1993 voluntary administration means voluntary administration under Part 15A of the Companies Act 1993 voting right has the same meaning as in section 2(1) of the 25 Reserve Bank of New Zealand Act 1989 voting security has the same meaning as in section 2(1) of the Reserve Bank of New Zealand Act 1989.
For the purposes of this Act, a reference to an insurer’s in- surance business includes business relating to the investment, 30 administration, and management of the assets of the insurer and of its statutory funds (if any).
For the purposes of this Act, a licensed insurer or an associated person is operating fraudulently or recklessly if— (a) it contracts liabilities that the directors did not, at the 35 time the liabilities were contracted, honestly believe on reasonable grounds the insurer or person would be able (2) (3) 22 Insurance (Prudential Supervision) Bill Part 1 cl 7 (b) (c) to pay when they fell due for payment as well as all its other liabilities (including contingent liabilities); or it carries on any business, or operates, in a reckless man- ner; or it carries on any business or operates with intent to 5 defraud its policyholders, creditors, shareholders, or members or the policyholders, creditors, sharehold- ers, or members of any other person, or for any other fraudulent purpose.
For the purposes of this Act, a person is ordinarily resident 10 in New Zealand if that person— (a) (b) is domiciled in New Zealand; or is living in New Zealand and the place where that person usually lives is, and has been for the immediately pre- ceding 12 months, in New Zealand, whether or not that 15 person has on occasions been away from New Zealand during that period.
For the purposes of this Act, a reference to information or data that is false or misleading includes a reference to information or data that is false or misleading by reason of— (a) the form or context in which it is published or supplied; or the omission of any other information that is material in the form and context in which it is published or sup- plied.
(b) 20 25 Meaning of contract of insurance For the purposes of this Act, unless the context otherwise re- quires, a contract of insurance is a contract involving the transference of risk and under which a person (the insurer) agrees, in return for a premium, to pay to or for the account 30 of another person (the policyholder) a sum of money or its equivalent, whether by way of indemnity or otherwise, on the happening of an uncertain event.
For the purposes of this Act, unless the context otherwise re- quires, contract of insurance— (a) means a contract involving the transference of risk and under which a person (the insurer) agrees, in return for a premium, to pay to or for the account of another per- 35 23 (4) (5) 7 (1) (1) Part 1 cl 7 Insurance (Prudential Supervision) Bill (2) son (the policyholder) a sum of money or its equivalent, whether by way of indemnity or otherwise, on the hap- pening of 1 or more uncertain events; and includes a contract of reinsurance.
(b) In this section, uncertain event means an event— (a) with respect to which there is (from the perspective of the policyholder) an element of uncertainty as to when or whether it will take place; and that is beyond the insurer’s control.
(b) 5 (3) A contract is not prevented from being a contract referred to 10 in subsection (1) merely because the insurer has a discretion as to whether or not it will pay to or for the account of the pol- icyholder a sum of money or its equivalent on the happening of the uncertain event.
(4) However, a contract, to the extent that it provides for, or relates 15 to, any of the following is not a contract of insurance for the purposes of this Act: (a) a derivative transaction (within the meaning of section 136(1) of the Crown Entities Act 2004): a guarantee under which a person agrees to answer to 20 another person for the debt, default, or liability of a third person: a repayment waiver (within the meaning of section 5 of the Credit Contracts and Consumer Finance Act 2003): a product or service guarantee or warranty in relation 25 to any goods or services that is given or made by the manufacturer or supplier: any lump sum, annuity, pension, allowance, refund, or other payment arising from membership of a super- annuation scheme (within the meaning of section 2A of 30 the Superannuation Schemes Act 1989) or a KiwiSaver scheme (within the meaning of section 4(1) of the Kiwi- Saver Act 2006): gambling (within the meaning of section 4(1) of the Gambling Act 2003): a call-out service that involves providing assistance in respect of a motor vehicle (within the meaning of sec- tion 2(1) of the Land Transport Act 1998) that cannot be operated (for example, because it has broken down, has 35 (b) (c) (d) (e) (f) (fa) 24 5 10 Insurance (Prudential Supervision) Bill Part 1 cl 8 run out of fuel, or has a flat tyre, or because the owner or operator is locked out), being a service that is not provided when the motor vehicle is involved in a motor vehicle accident, is stolen, or is damaged owing to theft or vandalism: any other transaction or matter of a class declared by regulations to be transactions or matters that are not by way of insurance.
(g) 8 (1) Meaning of carrying on insurance business in New Zealand For the purposes of this Act, a person carries on insurance business in New Zealand if the person— (a) is— (i) 15 (ii) (iia) a body corporate or an association of persons in- corporated or formed in New Zealand; or an overseas company that is required to be regis- tered or deemed to be registered under the Com- panies Act 1993; or an association of persons formed outside New Zealand that is carrying on business in New 20 Zealand within the meaning of section 332 of the Companies Act 1993 (applied with all necessary modifications as if the references in that section to an overseas company were references to an association of persons); or ordinarily resident in New Zealand; and (iii) acts, or has at any material time acted, as an insurer in New Zealand or elsewhere; and is liable as an insurer under a contract of insurance to a New Zealand policyholder.
25 30 (b) (c) (2) However, a A person does not carry on insurance business in New Zealand for the purposes of this Act if the person is— (a) a Crown entity within the meaning of section 7(1) of the Crown Entities Act 2004 (for example, the Acci- dent Compensation Corporation, the Earthquake Com- 35 mission, or the Housing New Zealand Corporation); or an entity named in Part 1 of Schedule 1 of the Ombuds- men Act 1975; or (b) 25 Part 1 cl 8 Insurance (Prudential Supervision) Bill (3) (c) (d) (e) the National Provident Fund Board (as continued in ex- istence under section 12 of the National Provident Fund Restructuring Act 1990) or a subsidiary of the Board; or a public entity (within the meaning of section 5(1) of the Public Audit Act 2001) that is declared by regulations 5 to be an entity to which this paragraph applies; or an incorporated society or other association of persons that satisfies the criteria specified in subsection (3); or the subject of a declaration under section 8A.
(f) The criteria that an incorporated society or other association 10 of persons must satisfy for the purposes of subsection (2)(e) are that— (a) the primary purpose or purposes of the society or asso- ciation relate to a particular profession, trade, or occu- pation; and all of the members of the society or association consist of 1 or more of the following: (i) 15 persons that belong to, or are associated with, the particular profession, trade, or occupation: bodies corporate or associations of persons that 20 carry on the business of the particular profession, trade, or occupation: persons that act on behalf of any person referred to in subparagraph (i) or (ii); and (ii) (iii) the society or association is not carried on for profit; and 25 insurance cover is provided by the society or association only— (i) (ii) to its members or relatives of its members; or in respect of the activities of its members when carrying out, or conducting, the work of the pro- 30 fession, trade, or occupation; and the provision of insurance cover by the society or asso- ciation is ancillary or incidental to the primary purpose or purposes of the society or association.
(b) (c) (d) (e) (4) A person does not carry on insurance business in New Zealand 35 for the purposes of this Act merely because the person— (a) is a specified bailee who has liability in respect of goods belonging to another person and in the possession, or 26 Insurance (Prudential Supervision) Bill Part 1 cl 8A (b) under the control, of the specified bailee for the purpose of the carriage, storage, or sale of those goods; or is an owner or operator of a specified place of accommo- dation who has liability in respect of goods belonging to another person that are— (i) in the possession, or under the control, of a guest at the specified place of accommodation; or deposited with the owner or operator of the spe- cified place of accommodation for safe custody.
(ii) 5 (5) (6) 10 In subsection (4),— specified bailee means a carrier, carrier’s agent, forwarding agent, wharfinger, shipping agent, or the owner or operator of a warehouse specified place of accommodation means a hotel, motel, boarding house, or lodging house used for the provision of 15 temporary or transient accommodation.

Subsection (1) is subject to subsections (2) to (4) and section 8A.
(1) 8A Bank may declare that person is not carrying on insurance business in New Zealand in certain circumstances The Bank may, by notice to a person, declare that the person is not carrying on insurance business in New Zealand for the purposes of this Act if the Bank is satisfied that— (a) the person is or will be an insurer only by reason of the fact that the person— (i) has entered or will enter into an isolated contract of insurance as an insurer; or occasionally enters into contracts of insurance as an insurer; and (ii) 20 25 (b) (c) entering into the contract or contracts referred to in 30 paragraph (a) is incidental or ancillary to the business carried on by the person; and requiring the person to obtain a licence would, in the circumstances, be unduly onerous or burdensome.
(2) Subsection (1) is subject to section 228 (which provides for 35 general provisions relating to declarations and exemptions).
27 Part 1 cl 9 Insurance (Prudential Supervision) Bill 9 (1) Meaning of associated person and holding entity For the purposes of this Act, unless the context otherwise re- quires, a person (A) is associated with another person (B) if— (a) (b) more than half of the voting securities of A, other 5 B is A’s holding entity or subsidiary; or than voting securities that carry no right to participate beyond a specified amount in a distribution of either profits or capital, are held by B and persons that are associated with B (whether directly or indirectly, but other than in a fiduciary capacity); or 10 (c) more than half of the voting securities of each of A and B, other than voting securities that carry no right to participate beyond a specified amount in a distribution of either profits or capital, are held by members of the other (whether directly or indirectly, but other than in a 15 fiduciary capacity); or the businesses of A and B have been so carried on that the separate business of each person, or a substantial part of it, is not readily identifiable; or there is another person with which both persons are as- 20 sociated.
(d) (e) (2) Associated person has a corresponding meaning.

(3) For the purposes of this Act, a person is another person’s hold- ing entity if, and only if, that other person is its subsidiary.

Application of Act to friendly societies and credit unions This Act applies to a friendly society or a credit union (as those terms are defined in section 2 of the Friendly Societies and Credit Unions Act 1982) as if the friendly society or credit union were a body corporate.
Bank’s functions Bank’s functions under Act The functions of the Bank under this Act are to— (a) (b) issue licences under Parts 2 and 5; and undertake prudential supervision of licensed insurers; and 25 30 35 10 11 28 Insurance (Prudential Supervision) Bill Part 1 cl 13 (c) (d) take appropriate action in respect of licensed insurers and other persons that have failed, are failing, or are likely to fail to comply with this Act or the regulations or are otherwise in financial or other difficulties; and carry out other functions and duties and exercise powers 5 conferred on it by this Act and the regulations.
12 (1) (2) (3) Bank must have regard to directions about Government policy objectives The Minister may direct the Bank to have regard to a Govern- ment policy that relates to the Bank’s functions under this Act.

10 The Bank must have regard to every direction given by the Minister under this section.

The Minister must consult with the Bank before giving a di- rection.
(4) A direction must— (a) (b) be set out in a written statement signed by the Minister; and as soon as practicable after it is given, be— (i) presented to the House of Representatives by the Minister; and published in the Gazette.

(ii) (5) The Minister may not give a direction that requires the per- formance or non-performance of a particular act by the Bank, or by any employee or officer of the Bank, or the bringing about of a particular result, in respect of a particular person.
(6) A direction may be amended, revoked, or replaced in the same way as it may be given.

Act binds the Crown 13 Act binds the Crown This Act binds the Crown.

29 15 20 25 30 Part 2 cl 14 Insurance (Prudential Supervision) Bill Part 2 Licensing and prudential regulation of insurers Subpart 1—Licensing of insurers Requirement to be licensed 5 14 (1) Persons that carry on insurance business in New Zealand must be licensed 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 10 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): in the case of a body corporate, to a fine not exceeding $1,000,000.
(b) 15 Offence for person who is not licensed insurer to hold itself out to be licensed insurer (1) A person commits an offence if the person— (a) (b) is not a licensed insurer; and 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 25 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): in the case of a body corporate, to a fine not exceeding 30 $1,000,000.
(b) Process for obtaining licence Application for licence as insurer 16 (1) Any body corporate that carries on insurance business in New Zealand, or proposes to carry on insurance business in New 35 30 15 20 Insurance (Prudential Supervision) Bill Part 2 cl 17 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 5 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 applica- tion.

(4) An applicant commits an offence if it provides false or mis- 10 leading information to the Bank for the purposes of an appli- cation and is liable, on summary conviction, to a fine not ex- ceeding $1,000,000.
17 Applicant must provide fit and proper policy, fit and proper certificate, and risk management programme (1) An applicant must provide to the Bank with its application— a copy of a fit and proper policy that complies with sections 32 to 34 section 32; and a certificate that— (i) (b) (a) 15 (ii) (iii) states that, in the opinion of all of the directors 20 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 is signed on behalf of all the directors of the ap- 25 plicant by at least 2 directors of the applicant (or, if the applicant has only 1 director, by that dir- ector); and contains, or is accompanied by, a certificate from each director or relevant officer that is signed by 30 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 35 with section 73.
31 Part 2 cl 18 Insurance (Prudential Supervision) Bill (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.
Entitlement to licence 18 (1) An applicant is entitled to be issued with a licence if the Bank 5 is satisfied that— (a) (b) (c) (d) (e) (ea) (f) (g) (h) 10 the applicant holds a current financial strength rating that complies with section 61 (unless a rating would not be required immediately after the issue of a licence as a result of the application of section 61(2)); and the applicant has the ability to carry on its business or proposed business in a prudent manner; and the applicant has the ability to comply with subpart 2 and the regulations; and in the case of an applicant who carries on, or proposes to 15 carry on, business as a life insurer, the applicant has the ability to comply with subpart 3 and the regulations; and the applicant has the ability to comply with the proposed conditions of licence (if any); and the applicant holds and has the ability to maintain a min- imum amount of capital that is specified in an applicable solvency standard; and the applicant has complied with section 17(1)(a) and (b) and the fit and proper policy that is provided is sat- 25 isfactory; and the applicant has complied with section 17(1)(c) and the risk management programme that is provided is sat- isfactory; and the applicant’s incorporation and ownership structure, 30 ownership, governance structure, and financial strength are appropriate, having regard to the size and nature of the applicant’s business or proposed business, includ- ing— (i) the size and type of insurance business that is, or 35 is proposed to be,
 carried out; and the size and type of risks that are, or are proposed to be, insured; and 20 (ii) 32 Insurance (Prudential Supervision) Bill Part 2 cl 18 (ii) in the case of an applicant that is an overseas person,— the law and regulatory requirements of the ap- (i) plicant’s home jurisdiction that apply to the applicant and relate to the matters specified in subsection (3) are appropriate, having regard 5 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 10 New Zealand; and the nature and extent of prudential supervision that applies to the applicant and to insurers gen- erally in the applicant’s home jurisdiction are ap- propriate, having regard to whether the pruden- 15 tial supervision is, in terms of achieving the pur- poses of this Act, at least as satisfactory as the nature and extent of prudential supervision that applies to insurers incorporated in New Zealand; and the applicant— is the Financial Service (i) Providers (Registration and Dispute Resolution) Act 2008; or complies with section 13(a) and (b) of that Act; 25 and registered under (ii) 20 the applicant has the ability to comply with the Anti- Money Laundering and Countering Financing of Ter- rorism Act 2009 (if the applicant is, or will be, a report- ing entity under that Act); and the applicant complies with any other prescribed re- quirements.
(i) (j) (k) (l) 30 35 (2) (3) 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.
For the purposes of subsection (1)(i)(i), the matters are— (a) the licensing, registration, or authorisation of insurers; and the supervision of insurers; and (b) 33 Part 2 cl 19 Insurance (Prudential Supervision) Bill (c) (d) (e) (f) (g) solvency and capital standards that apply to insurers; and financial reporting, accounting, and auditing standards; and corporate governance standards; and matters concerning insurers that are insolvent or other- wise in serious financial difficulties; and the disqualification of persons to be or to act as directors or relevant officers of an insurer.
5 The law and regulatory requirements referred to in subsec- 10 tion (1)(i)(i), and the nature and extent of the prudential super- vision referred to in subsection (1)(i)(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.
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 sub- section (1)(j).
15 20 Carrying on business in prudent manner Subsection (2) applies when the Bank is— (a) considering, for the purposes of section 18(1)(b), the ability of an applicant to carry on its business or pro- posed business in a prudent manner; or considering what conditions should be imposed under section 20 relating to the applicant carrying on its busi- ness or proposed business in a prudent manner; or considering whether a licensed insurer is carrying on its business in a prudent manner.
(b) (c) The Bank must confine its consideration to the following mat- ters: (a) financial and human resources in relation to the size and nature of the business or proposed business: internal controls or proposed internal controls: the size and type of insurance risk that is, or is proposed to be, carried by the applicant or insurer: (b) (c) 25 30 35 (4) (5) 19 (1) (2) 34 Insurance (Prudential Supervision) Bill Part 2 cl 20 (d) (e) (f) (g) reinsurance arrangements that have been, or are pro- posed to be, entered into: 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 5 those activities may be prejudicial to the solvency of the applicant or insurer or its ability to comply with this Act or the regulations): the nature and extent of transactions that the applicant or insurer has with, or in respect of, related parties (for 10 example, loans to, or from, a related party or guarantees in respect of a related party’s debts): any other prescribed matters.
Conditions of licence Conditions of licence 20 (1) A body corporate may be licensed as a licensed insurer un- conditionally or subject to any conditions that the Bank may impose under subsection (2).
15 (2) A licence may be subject to any of the following conditions: (a) (b) (c) (d) conditions that relate to any of the matters referred to 20 in section 19 (which relates to carrying on business in a prudent manner), including any matters prescribed by regulations made for the purposes of section 19(2)(g): conditions that require a licensed insurer to maintain a solvency margin in accordance with an applicable sol- 25 vency standard (including requiring the insurer to main- tain a minimum amount of capital in accordance with the standard): conditions that require a life insurer to maintain sol- vency margins in respect of the statutory funds of the in- 30 surer in accordance with an applicable solvency stand- ard (including requiring the insurer to maintain a min- imum amount of capital in accordance with the stand- ard): a condition that requires a specified amount or propor- 35 tion 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, 35 Part 2 cl 21 Insurance (Prudential Supervision) Bill amount of insurance liability, a combination of pre- mium revenue and amount of insurance liability, or in any other way): in the case of a licensed insurer that has not yet com- menced carrying on insurance business in New Zealand, 5 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: a condition that
 specifies an amount of insur- 10 ance 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 liabil- 15 ity, or in any other way): (ii) a condition that requires the licensed insurer or the dir- ectors of the insurer (or both) to certify that any condi- tions have been complied with (being certification that is given at the time or times and in the manner specified 20 in the condition): a condition that requires a certificate given under para- graph (f) to be verified by an the appointed actuary or another person specified in the condition (being verifi- cation that is given at the time or times and in the man- 25 ner specified in the condition): any other prescribed conditions or conditions that relate to prescribed matters.
(e) (f) (g) (h) Subsection (2)(c) does not limit subsection (2)(b).

(3) (4) A condition under subsection (2)(b) or (c) may— specify the amount of the solvency margin; or set the level of the solvency margin by means of a ratio, percentage of another amount, or in any other way.
(a) (b) 30 Bank may modify conditions of licence The Bank may, at any time after a licence is issued, by notice 35 in writing to the licensed insurer,— (a) impose conditions of licence (whether or not the licence is already subject to conditions); or 21 (1) 36 Insurance (Prudential Supervision) Bill Part 2 cl 23 (b) vary, remove, add to, or substitute any conditions of licence.

Section 20(2) and (3) apply for the purposes of subsection (1) with all necessary modifications.
The Bank must not exercise a power referred to in subsection 5 (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 the notice contains, or is accompanied by, a statement of the Bank’s reasons; and the licensed insurer has a reasonable opportunity to make submissions to the Bank; and the Bank has regard to those submissions.
(b) (c) (d) 10 Offence to fail to comply with conditions of licence A licensed insurer commits an offence if it fails to comply with 15 a condition of its licence and is liable, on summary conviction, to a fine not exceeding $500,000.

Licensed insurer must report likely failure to comply with solvency margin imposed under licence conditions If a licensed insurer is likely to fail to maintain a solvency 20 margin at any future time, it must as soon as practicable report that matter to the Bank.
(2) (3) 22 23 (1) (2) A licensed insurer that fails to comply with subsection (1) commits an offence if it knows, or could be reasonably ex- pected to know, that the insurer is likely to fail to maintain a 25 solvency margin at any future time.

(3) A licensed insurer that commits an offence under this sec- tion is liable on summary conviction to a fine not exceeding $500,000.
23 (1) Licensed insurer must report likely failure to comply with 30 solvency margin imposed under licence conditions 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.
35 37 Part 2 cl 24 Insurance (Prudential Supervision) Bill (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.

Notification of decision Bank must notify applicant of decision and give notice on 5 its Internet site The Bank must, after it has made a decision on an application for a licence, give written notice of the decision to the appli- cant.
If the Bank refuses to issue a licence, the notice must contain, 10 or be accompanied by, a statement of the Bank’s reasons for the refusal.

The Bank must give notice of the issue of a licence on the Bank’s Internet site.
Bank must be notified before controlling interest is acquired or control is obtained and before corporate form is changed 15 20 Bank must be notified before controlling interest is acquired or obtained and before corporate form is changed If a person that did not have a controlling interest in a licensed insurer when the licence was issued intends or proposes to ac- quire or obtain, after the licence is issued, a controlling interest in the insurer, the person must notify the Bank of that matter before the controlling interest is acquired or obtained.
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.
The Bank must, after being notified under subsection (1) or 30 (2), consider whether, if the controlling interest is obtained or acquired or the corporate form is changed, the Bank would still be satisfied of the matters in section 18(1)(a) to (l) (which are the matters that the Bank must be satisfied of before an applicant is entitled to be issued with a licence).
35 25 24 (1) (2) (3) 25 (1) (2) (3) 38 Insurance (Prudential Supervision) Bill Part 2 cl 25 (4) The person referred to in subsection (1) and the licensed insurer that is the subject of a notice under subsection (1) or (2) must provide to the Bank the information that is required by the Bank to assist it in acting under subsection (3).

(5) A person or licensed insurer that fails to comply with this sec- 5 tion commits an offence and is liable on summary conviction to a fine not exceeding $500,000.
26 Bank must notify decision within 20 working days of receiving all relevant information The Bank must, within 20 working days of receiving under 10 section 25(4) all of the information that is required by the Bank to assist it in acting under section 25(3), give writ- ten notice of its decision under that subsection together with a statement of the Bank’s reasons to the licensed insurer and the person referred to in section 25(1) (if any).
15 27 Meaning of controlling interest the insurer is a subsidiary of A; or For the purposes of sections 25 and 28, a person (A) has a controlling interest in an insurer if— (a) (b) more than half of the voting securities of the insurer, 20 other than voting securities that carry no right to par- ticipate beyond a specified amount in a distribution of either profits or capital, are held by A and persons that are associated with A (whether directly or indirectly, but other than in a fiduciary capacity).
25 25 (1) (2) (3) would become a holding entity of a licensed insurer; or Bank must be notified before control is obtained Subsection (2) applies if, as a result of a proposed transac- tion, a person (person A)— (a) (b) would obtain control of a licensed insurer.

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.
Subsection (2)— 30 35 39 Part 2 cl 26 Insurance (Prudential Supervision) Bill (a) (b) applies regardless of whether person A is a party to the proposed transaction; but does not apply to person A if— (i) person A does not know of the proposed transac- tion before it takes effect; or a specified person notifies the Bank of the pro- posed transaction under subsection (2).
(ii) 5 In this section and sections 27 and 28,— (a) (b) (c) proposed transaction means a transaction or an ar- rangement that is proposed to take effect after the li- 10 cence is issued to the licensed insurer referred to in sub- section (1): 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 15 voting rights in the insurer; or 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: (ii) 20 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 25 (1); or a person who acts, or is accustomed to act, in accordance with the wishes of person A.
(ii) Bank must be notified before corporate form is changed If a licensed insurer intends or proposes to change its corporate 30 form (for example, as a result of demutualisation), the insurer must notify the Bank of that matter before the change takes place.
Bank must consider whether it is still satisfied as to licensing matters The Bank must, after being notified under section 25 or 26, consider whether, if the proposed transaction takes effect or the 35 (4) 26 27 (1) 40 Insurance (Prudential Supervision) Bill Part 2 cl 28 (2) (3) corporate form is changed, the Bank would still be satisfied of the matters in section 18(1)(a) to (l) (which are the matters that the Bank must be satisfied of before an applicant is entitled to be issued with a licence).
Each of the following persons must, within the time and in 5 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 25, the person that notified the Bank and the licensed insurer: (b) in the case of section 26, the licensed insurer.
The Bank must, within 20 working days after receiving under subsection (2) all of the information that is reasonably re- quired by the Bank to assist it in acting under subsection (1), give written notice of its decision under that subsection 15 together with a statement of the Bank’s reasons to,— (a) in the case of section 25, the person that notified the Bank and the licensed insurer: in the case of section 26, the licensed insurer.
(b) 10 27A Offence to fail to notify or provide information 20 A licensed insurer or other person that fails to comply with section 25, 26, or 27(2) commits an offence and is liable, on summary conviction, to a fine not exceeding $500,000.
Cancellation of licence 28 (1) Cancellation of licence The Bank may cancel a licence if the Bank is satisfied that— (a) 1 or more of the following applies: (i) 25 the licensed insurer has asked the Bank, by writ- ten notice, to cancel its licence: the licensed insurer has ceased to carry on insur- 30 ance business in New Zealand: the licensed insurer has breached a condition of the licence that requires it to commence carrying on insurance business in New Zealand: there has been a failure to comply with section 35 25(1), (2), or (4) 25, 26, or 27(2) in respect of (ii) (iii) (iv) 41 Part 2 cl 28 Insurance (Prudential Supervision) Bill (v) (v) the licensed insurer (whether the failure is by a person referred to in section 25(1) 25(2) or the insurer): the Bank has given a notice under section 26 that, if a controlling interest is obtained or ac- 5 quired or the corporate form is changed, it would no longer be satisfied of 1 or more of the matters in section 18(1)(a) to (l), and (whether before or after that notice is given) the controlling inter- est is obtained or acquired or the corporate form 10 is changed: the Bank has given a notice under section 27(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 15 18(1)(a) to (l), and (whether before or after that notice is given) the proposed transaction takes effect or the corporate form is changed: the licensed insurer has been deregistered under section 18 of the
 Financial Service Providers 20 (Registration and Dispute Resolution) Act 2008 and has not been reregistered under that Act (whether under section 22 of that Act or other- wise) within the 3-month period from the date of deregistration: 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 (vii) (vi) 25 that has been removed from the overseas regis- 30 ter (within the meaning of the
 Companies Act 1993): the licensed insurer has been liquidated, wound up, or dissolved or has otherwise ceased to exist; and 35 (ix) (b) the licensed insurer has no liabilities under any con- tracts of insurance in respect of insurance business car- ried on by it in New Zealand.
42 (2) (3) (4) 29 (1) (2) Insurance (Prudential Supervision) Bill Part 2 cl 29 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 the notice contains, or is accompanied by, a statement 5 of the Bank’s reasons; and 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 the Bank has regard to any objections that are received before the close of the date specified under paragraph (c).
10 (b) (c) (d) The Bank must, as soon as practicable after cancelling a li- cence, give— (a) (b) public notice of the cancellation; and in the case of a cancellation under subsection (1)(a)(i) to (vi), written notice of the cancellation to the insurer.

In this section, public notice means that the notice is pub- lished— (a) in 1 or more daily newspapers circulating in each of the cities of Auckland, Hamilton, Wellington, Christchurch, and Dunedin; and on the Bank’s Internet site.
(b) 15 20 25 Assignment of liabilities to enable cancellation If the Bank considers that it would, under section 28, 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 30, to 30 assign its liabilities to 1 or more other licensed insurers.
The licensed insurer must— (a) effect the assignment of the liabilities within the period specified in the direction; and comply with any conditions relating to the assignment 35 that are specified by the Bank in the direction; and comply with section 30(4).

(b) (c) 43 Part 2 cl 30 Insurance (Prudential Supervision) Bill (3) (4) Subsections (1) and (2) have effect despite section 42(1) (which relates to transfers and amalgamations with the Bank’s approval).
The licensed insurer may, in connection with an assignment under this section, assign any rights or benefits in connection 5 with contracts of insurance in respect of the insurance busi- ness 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 a direction under this section and is liable, on summary 10 conviction, to a fine not exceeding $500,000.
(2) Bank’s approval of assignment 30 (1) A licensed insurer must not assign its liabilities under section 29, and a purported assignment under that section is of no effect, unless the assignment is approved by the Bank under 15 subsection (2).
The Bank may only approve a proposed assignment of an in- surer’s liabilities under section 29 if the Bank is satisfied that the assignment is appropriate, having regard to— (a) (b) the interests of the insurer’s policyholders; and the interests of the policyholders of the licensed insurer or insurers to whom the liabilities are to be assigned; and any other matter the Bank considers relevant.

(c) The approval must be in writing and may be made subject to 25 specified conditions.
If the Bank approves an assignment, the insurer must— comply with the conditions of the approval; and (a) give reasonable notice (in writing) of the assignment to (b) the insurer’s policyholders; and give the Bank such written evidence of the assignment as the Bank reasonably requires.
(c) 30 20 Effect of assignment If a licensed insurer (the first insurer) accepts an assignment of liabilities from another licensed insurer (the second in- 35 (3) (4) 31 44 Insurance (Prudential Supervision) Bill Part 2 cl 32 surer) that is approved by the Bank under section 30, the following are taken to have occurred: (a) contracts of insurance in respect of which liability is ac- cepted by the first insurer (the transferring contracts) are to be treated for all purposes as if each contract had 5 been transferred by novation from the second insurer to the first insurer: a policyholder under a transferring contract is taken to have the same rights against the first insurer as the pol- icyholder would have against that insurer had the per- 10 son’s contract of insurance been transferred by novation to the first insurer: 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 15 to the first insurer from the second insurer.
(b) (c) 32 (1) (2) (3) Fit and proper requirements 20 Licensed insurer must be subject to fit and proper policy for directors and relevant officers Every licensed insurer must— (a) be subject to a written policy that governs the qualifica- tions, 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 25 only fit and proper persons are appointed to, and con- tinue to hold, those positions (a fit and proper policy); and take all practicable steps to comply with that policy.
(b) The fit and proper policy must clearly specify the qualifica- 30 tions, 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.

The qualifications, requirements, and other criteria for a par- ticular position that are specified in the fit and proper policy 35 must take into account the fit and proper matters set out in section 34.
45 Part 2 cl 32 Insurance (Prudential Supervision) Bill (3) (4) The qualifications, requirements, and other criteria for a par- ticular 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.
The fit and proper policy must— (a) include the processes to be undertaken in assessing whether a person is fit and proper to be appointed to, and hold, a position, including processes relating to— (i) who will conduct fit and proper assessments on 10 behalf of the insurer; and 5 (ii) what information will be obtained and how it will (iii) (iv) be obtained; and the matters that will be considered before deter- mining if a person is fit and proper for a position; 15 and the decision-making processes that will be fol- lowed; and (b) (c) (a) (d) specify the actions to be taken where a person is as- sessed as not being fit and proper; and require fit and proper reassessments for each position to be conducted at least once in every 2-year period to ensure that the person who holds the position remains a fit and proper person; and comply with the prescribed requirements; and contain adequate provisions— (i) 20 25 to encourage any person to disclose information to the insurer or the Bank that may be relevant to a fit and proper assessment; and for giving or obtaining any consents required for 30 the collection and use of any information by the insurer to comply with the policy or this Act sec- tion 35 and by the Bank for its powers and func- tions under this Act in connection with the policy.
(ii) (5) A licensed insurer must obtain the Bank’s approval before its 35 fit and proper policy is amended in a material way.

(6) A licensed insurer that fails to comply with this section com- mits an offence and is liable, on summary conviction, to a fine not exceeding $500,000.
46 Insurance (Prudential Supervision) Bill Part 2 cl 34 33 (1) Group fit and proper policy 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 5 group policy).
(2) However, if the group policy does not comply with the require- ments of section 32(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 require- 10 ments of section 32(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).
34 (1) Fit and proper matters For the purposes of section 32, the fit and proper matters in 15 relation to a particular position are as follows: (a) whether the person has the qualifications and experi- ence reasonably expected for the position: (b) whether the person has been concerned with or taken part in the management of a person that has been— (i) put into liquidation, receivership, or voluntary administration or has otherwise been wound up or dissolved; or declared to be subject to statutory management or judicial management; or subject to an arrangement or process under the laws of an overseas jurisdiction that corresponds, or is similar, to any of those specified in sub- paragraph (i) or (ii): (ii) (iii) 20 25 (c) whether the person has, in any civil or criminal proceed- 30 ings, been found by a court or tribunal to have— (i) engaged in an act, omission, or course of conduct that constitutes serious wrongdoing; or aided, abetted, counselled, or procured any other person to engage in an act, omission, or course of 35 conduct that constitutes serious wrongdoing: (ii) (d) whether the person has at any time been adjudged bankrupt and, if the person has been discharged from 47 Part 2 cl 34 Insurance (Prudential Supervision) Bill bankruptcy, the time that has elapsed since the person was discharged: whether the person— (i) is the subject of current disciplinary action in re- spect of a profession or occupation (being discip- 5 linary action taken by a regulatory or disciplinary body for persons engaging in
 that profession or occupation); or has been the subject of disciplinary action of that kind that has involved a finding of guilt, however 10 expressed: (ii) (e) (f) whether the person has at any time been prohibited from 1 or more of the following under an order made, or a notice given, under New Zealand law or the law of an overseas jurisdiction: (i) (ii) (iii) being a director of an entity: being a promoter of an entity: being concerned or taking part in the manage- ment of an entity: (g) whether the
 person has at any time— 15 20 (i) (ii) (iii) failed to comply with the directions of the Bank given by or under this Act or any other enact- ment; or failed to comply with the directions of an over- seas supervisor given by or under the law of an 25 overseas jurisdiction; or obstructed or hindered the Bank in its exercise or performance of a power, function, or duty under this Act or any other enactment; or obstructed or hindered an overseas supervisor in 30 its exercise or performance of a power, function, or duty under the law of an overseas jurisdiction: (h) whether the person has any conflict or potential conflict of interest (direct or indirect) that affects, or may affect, the person’s proper performance of the duties of the pos- 35 ition: whether the person has been convicted of an offence and, if so,— (i) the nature of the offence; and (iv) (i) 48 Insurance (Prudential Supervision) Bill Part 2 cl 35 (2) 34 (1) (ii) the circumstances in which the offence was com- mitted (including the time that has elapsed since the offence was committed and the person’s age when the offence was committed).
The matters in subsection (1) apply whether the circum- 5 stance, conduct, or event is, or occurs, in New Zealand or any other country.
Fit and proper standards The Bank may, by a notice signed by the Governor, issue fit and proper standards for the purposes of section 32(3) that— 10 specify matters that are relevant to the consideration of (a) whether a person is a fit and proper person to be ap- pointed to, and continue to hold, a position as a director or relevant officer; and specify the manner in which those matters must be taken 15 into account in respect of a fit and proper policy.
(b) (2) A fit and proper standard may be expressed to apply in relation to— (a) (b) (c) all licensed insurers or applicants; or a specified class or classes of licensed insurers or appli- 20 cants; or 1 or more specified licensed insurers or applicants.

(3) A fit and proper standard may— (4) 35 have general or specific application: differ according to differences in time or circumstance.
25 (a) (b) This section is subject to sections 228A to 228D (which provide for general provisions relating to standards).

Licensed insurer must provide fit and proper certificate for new directors or relevant officers or if Bank requires certificate 30 (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.
In addition, if the Bank has given a notice in writing to a li- 35 censed insurer that requires the insurer to provide to the Bank (2) 49 Part 2 cl 35 Insurance (Prudential Supervision) Bill (3) (4) (5) 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.
Subsection (2) applies whether or not a certificate in respect of the director or officer has previously been provided under 5 this section.
The certificate must— (a) (b) (c) (d) (e) (f) specify the director’s or relevant officer’s full name, previous names (if any), and residential address; and in the case of subsection (1), specify the date of the 10 appointment and the director’s or relevant officer’s date of birth; and state that, in the opinion of all directors of the licensed insurer after due inquiry by them, the director or rele- vant officer is, in accordance with its fit and proper pol- 15 icy, a fit and proper person to hold the relevant position; and 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 20 insurer’s fit and proper policy, a fit and proper person to hold the relevant position; and contain, or be accompanied by, a summary of informa- tion that is relevant to the consideration of whether the person satisfies the licensed insurer’s fit and proper pol- 25 icy; and 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 be in the prescribed form (if any).
30 (g) 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.

35 (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.
50 Insurance (Prudential Supervision) Bill Part 2 cl 37 36 (1) (2) Bank may exempt overseas insurers from compliance with section 35(1) The Bank may, by notice to an overseas insurer, exempt the insurer from compliance with section 35(1) to the extent that it relates to the directors of the insurer.
The Bank must, before granting an exemption, be satisfied that the law or regulatory requirements of the home jurisdiction of the insurer— (a) 5 provide for the assessment by an overseas supervisor of whether the persons who are appointed as directors of 10 the insurer are fit and proper persons to be appointed to that position; and provide for the removal of a person from being a dir- ector of the insurer if the overseas supervisor considers that the person is not a fit and proper person to hold the 15 relevant position.
(b) (2A) The matters in subsection (2) must be treated as being satis- fied in respect of an overseas insurer that is incorporated in a jurisdiction that is prescribed for the purposes of this subsec- tion.

This section is subject to section 228 (which provides for general provisions relating to exemptions).
(3) 20 37 (1) (2) (3) Power to remove directors and relevant officers This section applies if the Bank, after having regard to the fit and proper matters specified in section 34 an applicable fit 25 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.
If this section applies, the Bank may remove the director or relevant officer from the relevant position from a date specified 30 by the Bank.
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 in- surer— (a) (b) at any time; or for a period specified by the Bank; or 35 51 Part 2 cl 38 Insurance (Prudential Supervision) Bill (4) (5) (6) 38 (1) (2) (c) until 1 or more things specified by the Bank occur (for example, the director or relevant officer receives a spe- cified qualification).
This section may apply regardless of whether or not the dir- ector or relevant officer is, in accordance with the licensed in- 5 surer’s fit and proper policy, a fit and proper person to hold his or her position.

This section does not apply in respect of a director of an over- seas insurer.

This section has effect despite any contract, employment 10 agreement, enactment, or rule of law, or the terms of the constitution of a licensed insurer.
How power to remove is exercised The Bank must not exercise a power referred to in section 37 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 the notice contains, or is accompanied by, a statement of the Bank’s reasons; and the licensed insurer and the director or relevant officer each have a reasonable opportunity to make submis- sions to the Bank; and the Bank has regard to those submissions.
(b) (c) (d) The Bank must exercise the powers conferred by section 37 25 by giving notice in writing to— the licensed insurer; and (a) the director or the relevant officer; and (b) in the case of a director, the Registrar of Companies.

(c) 15 20 (3) A notice given under subsection (2)(c) is sufficient compli- 30 ance 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.
52 Insurance (Prudential Supervision) Bill Part 2 cl 41 39 (1) Former director or relevant officer must not accept reappointment in breach of direction If a person has been removed from a particular position under section 37, the person may not accept reappointment to the position in breach of a direction given under section 37(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).

Appeals from Bank’s decision 40 (1) A director or relevant officer or former director or relevant offi- cer who is the subject of a decision of the Bank under section 37 may appeal to the High Court against the decision.

5 10 (2) An appeal is by way of rehearing.


(3) A decision against which an appeal is lodged continues in 15 force pending the determination of the appeal unless the High Court orders otherwise.
Appeal to Court of Appeal on question of law 41 (1) Any party to an appeal under section 40 who is dissatisfied with any determination of the High Court in the proceedings 20 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.
In determining whether to grant leave to appeal, the Court of Appeal must have regard to whether the question of law in- volved in the appeal is one that, by reason of its general or public importance or for any other reason, ought to be submit- ted to the Court of Appeal for its decision.

The Court of Appeal, in granting leave, may impose the con- ditions that it thinks fit, whether as to costs or otherwise.
The decision of the Court of Appeal on any application for leave to appeal, or on an appeal under this section, is final.
30 25 (2) (3) (4) 53 Part 2 cl 42 Insurance (Prudential Supervision) Bill Transfers and amalgamations Transfers and amalgamations must be approved 42 (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 in the case of any other insurer, the transfer of all or part of the insurer’s insurance business to 10 another person; or (ii) 5 (2) (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).
15 For the purposes of sections 43 to 51,— amalgamated entity means the single entity that is proposed to result from and continue after a proposed amalgamation that requires approval under this section transferee means the person to whom all or part of the li- 20 censed insurer’s insurance business is proposed to be trans- ferred under a proposed transfer that requires approval under this section.
(3) A licensed insurer commits an offence if— (a) (b) the insurer fails to comply with subsection (1); or 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.

25 30 Every licensed insurer that commits an offence under subsec- tion (3) is liable, on summary conviction, to a fine not exceed- ing $1,000,000.
This section does not apply in respect of a transfer or amalgam- ation under section 29, sections 162 to 165, or subpart 35 4 of Part 4, or section 203A(5).

(4) (5) 54 Insurance (Prudential Supervision) Bill Part 2 cl 46 Request for approval 43 (1) A request for the Bank to give its approval under section 42 must be— (a) made in the manner that is specified by the Bank; and (b) accompanied by payment of the prescribed fee for the 5 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 10 Bank the information that is required by the Bank to assist it in determining whether to give its approval.
44 (1) Actuarial or other report on transfer or amalgamation proposal The Bank may arrange for an independent actuary or any other 15 suitably qualified person to make a written report on a pro- posed 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 in- 20 formation that is required by the actuary or person to assist him or her in preparing the report.
Costs of actuary’s report 45 (1) A licensed insurer that makes a request under section 43 is liable to pay to the Bank the reasonable costs incurred by the 25 Bank in obtaining the actuary’s report report or reports under section 44 (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.
30 46 Bank must have regard to certain matters in considering request In considering a request made under section 43, the Bank must have regard to the following matters: 55 Part 2 cl 47 Insurance (Prudential Supervision) Bill (a) (b) (c) the ability of the transferee, or the amalgamated entity, to comply with subpart 2 and, if applicable, subpart 3: the interests of the policyholders of the insurers that are parties to the proposed transfer or amalgamation: any other matter the Bank considers relevant.
47 (1) Bank’s decision on approval The Bank may, after considering a request made under sec- tion 43, by notice in writing to the licensed insurer or insur- ers,— (a) give its approval unconditionally or subject to any con- ditions that the Bank may impose under subsection (2); or refuse to give its approval.
(b) 5 10 (1A) The Bank must give the notice under subsection (1) within 15 20 working days after receiving both of the following: (a) all of the information under section 43(3) that is rea- sonably required by the Bank to assist it in determining whether to give its approval: all reports that the Bank has arranged to receive under 20 section 44 in respect of the proposed transfer or amal- gamation.
(b) The approval may be subject to any of the following condi- tions: (a) conditions that relate to any of the matters referred to 25 in section 19 (which relates to carrying on business in a prudent manner), including any matters prescribed by regulations made for the purposes of section 19(2)(g): a condition that requires a specified amount or propor- tion of the transferee’s or amalgamated entity’s insur- 30 ance 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 insur- ance liability, or in any other way): a condition that requires a licensed insurer or the dir- ectors of a licensed insurer (or both) to certify that any conditions have been complied with (being certification 35 (b) (c) (2) 56 (3) 48 49 50 51 (1) Insurance (Prudential Supervision) Bill Part 2 cl 51 that is given at the time or times and in the manner spe- cified in the condition): any other prescribed conditions or conditions that relate to prescribed matters.
(d) If the Bank refuses to give its approval, it must give a notice 5 to the licensed insurer or insurers that contains a statement of its reasons.

Offence to fail to comply with conditions of approval A licensed insurer commits an offence if it fails to comply with a condition of the approval imposed under section 47 10 and is liable, on summary conviction, to a fine not exceeding $500,000.
Requirement for approval is in addition to requirements under other enactments Sections 42 to 48 do not limit any other enactment that must 15 be complied with in order to give effect to a proposed transfer or amalgamation that requires approval under section 42 (for example, in the case of amalgamating companies, the require- ments of Part 13 of the Companies Act 1993).
Transfer or amalgamation not invalidated Nothing in sections 42 to 49 invalidates any transfer or amalgamation made without the written approval of the Bank.
20 Effect of assignment for purposes of approved transfer If the Bank approves a transfer under section 42 and, for the purposes of the transfer, a licensed insurer (the first insurer) 25 accepts an assignment of liabilities from another licensed in- surer (the second insurer), the following are taken to have occurred: (a) contracts of insurance in respect of which liability is ac- cepted by the first insurer (the transferring contracts) 30 are to be treated for all purposes as if each contract had been transferred by novation from the second insurer to the first insurer: 57 Part 2 cl 52 Insurance (Prudential Supervision) Bill (b) (c) a policyholder under a transferring contract is taken to have the same rights against the first insurer as the pol- icyholder would have against that insurer had the per- son’s contract of insurance been transferred by novation to the first insurer: 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.
5 (2) An agreement between the first insurer and the second insurer 10 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).

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


(3) 15 Publication of policies 52 Publication of policies The Bank must publish its policies in relation to how it acts, or proposes to act,— (a) (b) in determining applications for licences; and in imposing, varying, removing, or adding to conditions of licences; and in determining requests for approvals under section 43.
(c) Subpart 2—Prudential regulation of insurers Solvency standards 20 25 53 (1) Bank may issue solvency standards The Bank may, by a notice signed by the Governor, issue sol- vency standards for the purposes of this Act.

(2) A solvency standard may be expressed to apply in relation to— 30 (a) (b) (c) all licensed insurers or applicants; or a specified class or classes of licensed insurers or appli- cants; or 1 or more specified licensed insurers or applicants.
(3) A solvency standard may— 35 58 Insurance (Prudential Supervision) Bill Part 2 cl 54 (a) (b) have general or specific application: differ according to differences in time or circumstance.
(3A) The Bank must, before issuing a solvency standard, have re- gard to relevant overseas standards for the purpose of ensur- ing that the solvency standard to be issued by the Bank (the 5 proposed standard) does not apply, in respect of a particu- lar 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.
In subsection (3A), relevant overseas standards means 10 standards relating to solvency or capital that— (a) (3B) relate to matters that are the same as, or similar to, those that are covered by the proposed solvency standard; and apply to insurers in the home jurisdictions of the over- seas insurers to which the proposed solvency standard 15 will apply.
(b) (4) A solvency standard is a regulation for the purposes of the Regulations (Disallowance) Act 1989 but is not a regulation for the purposes of the Acts and Regulations Publication Act 1989.

(5) A solvency standard must be presented to the House of Rep- resentatives in accordance with section 4 of the Regulations (Disallowance) Act 1989.

This section is subject to sections 228A to 228D (which provide for general provisions relating to standards).
(4) 54 (1) (2) Public notice of solvency standards The Bank must give notice of the issue of a solvency standard in the Gazette.

The notice in the Gazette must state— (a) (b) the name of the solvency standard; and a brief description of the nature of the solvency stand- ard; and where copies of the solvency standard are available for inspection and purchase.

(c) 20 25 30 (3) The notice in the Gazette need not contain the solvency stand- 35 ard.
59 Part 2 cl 55 Insurance (Prudential Supervision) Bill (4) 55 (1) The Bank must make a solvency standard available to the pub- lic by making copies of it available— (a) at the head office of the Bank; and on the Bank’s Internet site; and for inspection at all reasonable times, free of charge,— (i) (ii) for purchase at all reasonable times and at a reasonable price.
(b) 5 Consultation The Bank must not issue a solvency standard unless— (a) the Bank has consulted with the persons or represen- 10 tatives of the persons that the Bank considers will be substantially affected by the issue of the standard; and those persons have had a reasonable opportunity to comment to the Bank; and the Bank has considered those comments.

(2) A failure to comply with subsection (1) does not affect the (b) (c) 15 validity of the standard.
56 Matters that may be contained in solvency standards A solvency standard may prescribe 1 or more of the following matters: (ab) for the purposes of sections 18(1)(ea) and 20(2)(b) and (c),— (i) 20 (ii) the minimum amount of capital that an insurer must hold and maintain: the methods for determining or calculating the 25 amount of capital that an insurer must hold and maintain (whether by reference to a specified for- mula, framework, or amount, a combination of specified formulae, frameworks, or amounts, or otherwise): 30 (a) (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, frame- work, or amount, a combination of specified formulae, frameworks, or amounts, or otherwise): the methods for determining whether, and the extent to which, a solvency margin is being maintained: 35 60 (c) (d) (e) (ea) (f) Insurance (Prudential Supervision) Bill Part 2 cl 56 requirements relating to reports about the financial con- dition of a licensed insurer and other reports relating to the solvency of the licensed insurer (including require- ments relating to the information that must be contained in the reports, who must prepare the reports, how often 5 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): for the purposes of any of paragraphs (ab) to (c),— (i) the methods for estimating or valuing the assets 10 or
 liabilities (or both) of a licensed an insurer: the assets of a licensed an insurer that must be disregarded (in whole or in part) for the purposes of estimating or valuing the assets of a licensed an insurer: 15 (ii) for the purposes of any of paragraphs (ab) to (c), any other matters relating to the assessment, or disclosure, of— (i) whether, and the extent to which, the value of a licensed an insurer’s assets exceeds the value of 20 its liabilities (including contingent liabilities); or (ii) whether a
 licensed an insurer is able to pay its li- abilities as they become due in the normal course of business; or other matters relating to the financial condition or 25 solvency of a licensed an insurer: (iii) requirements relating to the disclosure of information relating to the financial condition or solvency of a li- censed insurer to 1 or more of the following (including prescribing to whom and when disclosure must be made 30 and the manner of disclosure): (i) (ii) the Bank: the insurer’s policyholders or any class of those policyholders: the public or any class of the public: (iii) matters relating to the manner in which a review of ac- tuarial information under section 77 is to be carried out (including specifying information as being actuar- ial information for the purposes of that section).
35 61 Part 2 cl 57 Insurance (Prudential Supervision) Bill 57 58 (1) (2) 59 (1) (2) Offence to fail to comply with financial condition report reporting and disclosure requirements A licensed insurer commits an offence if it fails to comply with any of the requirements of a solvency standard under section 56(c) or (ea) that apply to the insurer and is liable, on sum- 5 mary conviction, to a fine not exceeding $500,000.
Incorporation by reference The following written material may be incorporated by refer- ence in a solvency standard: (a) standards, requirements, or recommended practices of 10 international or national organisations: standards, requirements, or recommended practices prescribed in any country or jurisdiction: any other written material that deals with technical mat- ters and is too large or impractical to include in, or print 15 as part of, the solvency standard.
(b) (c) Schedule 1 applies to any material incorporated by reference in a solvency standard.

Bank may amend or revoke solvency standard The Bank may, by a notice signed by the Governor,— (a) (b) Sections 54 and 55 apply, with all necessary modifications, for the purposes of subsection (1).

amend or revoke a solvency standard: revoke and replace a solvency standard.
20 (3) However, the Bank is not required to comply with section 25 55 in respect of an amendment to a solvency standard if, in its opinion, the amendment corrects a minor error or is otherwise of a minor nature.

Bank may exempt overseas insurers from compliance The Bank may, by notice to an overseas insurer, exempt the 30 insurer from compliance with a solvency standard or a part of a solvency standard.
The Bank must, before granting an exemption, be satisfied that— 60 (1) (2) 62 (a) (b) (c) Insurance (Prudential Supervision) Bill Part 2 cl 61 the overseas insurer is required, under the law or regu- latory requirements of the home jurisdiction of the in- surer, to comply with standards or requirements that re- late to the same or similar matters that are covered by the solvency standard or the part of a solvency standard 5 to which the exemption relates (the overseas standards or requirements); and the overseas standards or requirements— (i) cover the New Zealand business of the overseas insurer; and are, in terms of achieving the purposes of this Act, at least as satisfactory as the solvency stand- ard or the part of a solvency standard to which the exemption relates; and (ii) 10 the nature and extent of prudential supervision that ap- 15 plies 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 na- ture and extent of prudential supervision that applies to insurers incorporated in New Zealand in respect of the 20 solvency standard or the part of a solvency standard to which the exemption relates.
(3) This section is subject to section 228 (which provides for general provisions relating to exemptions).

Financial strength ratings 61 Licensed insurer must have current financial strength rating (1) A licensed insurer must have a current financial strength rating (2) that is given by an approved rating agency.
Subsection (1) does not apply to— (a) a licensed insurer that is a friendly society or a credit union if it has an annual gross premium income (as de- termined in the prescribed manner) that is less than a prescribed amount; or a licensed insurer that is included in a class of insur- 35 ers that is the subject of an exemption under section 229A(1)(a)(ii); or (a) 25 30 63 Part 2 cl 61A Insurance (Prudential Supervision) Bill (b) a licensed insurer if the only kind of insurance business carried on by the insurer in New Zealand is reinsurance business; or a captive insurer.
(c) Sections 63 to 71 do not apply to— (a) (b) a reinsurer in respect of its reinsurance business; or a captive insurer.

5 (3) (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.
10 61A Financial strength rating must refer to overseas policyholder preference 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 circum- 15 stances and in the prescribed manner, contain, or be accom- panied by, a reference to the overseas policyholder preference when the financial strength rating is disclosed under any of sections 64 and 67 to 69.
If subsection (1) is not complied with, the licensed insurer 20 must be treated as having failed to comply with section 64, 67, 68, or 69 (as the case may be).

25 Bank may approve rating agencies The Bank may approve a person as a rating agency for the purposes of this Act.
In deciding whether to approve a person as a rating agency, the Bank must have regard to the following: (a) (b) (c) the independence of the rating agency: the adequacy of resources available to the rating agency: the credibility and objectivity of the rating agency’s 30 methodology: the consistency and comparability of the rating agency’s ratings when assessed against ratings industry practice: the adequacy of the rating agency’s disclosure of infor- mation, including information about its processes, ex- 35 perience, and ownership: (d) (e) (1) (2) 62 (1) (2) 64 Insurance (Prudential Supervision) Bill Part 2 cl 63 (3) (4) (f) relevant international standards, codes, and recom- mended practices relating to the ratings industry.
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).

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 (5) A financial strength rating given to an insurer by an agency at a time when the agency was an approved rating agency does 10 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.

The Bank must publish and keep up to date a list of approved rating agencies on the Bank’s Internet site at all reasonable 15 times.
(6) 63 Licensed insurer must notify Bank of change in rating or credit watch warning (1) A licensed insurer must, within 20 working days after re- ceiving notice in writing that its financial strength rating has 20 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 receiv- ing notice in writing that a credit watch warning has been given 25 by an approved rating agency in respect of the insurer’s fi- nancial 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.
In this section, credit watch warning means any word, ex- 30 pression, 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.
(3) 65 Part 2 cl 64 Insurance (Prudential Supervision) Bill Disclosure of current rating to policyholder 64 (1) A licensed insurer that is required to comply with section 61(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 pol- 5 icyholder, disclose in writing to the policyholder— (a) (b) the insurer’s current financial strength rating; and the name of the agency by which the rating was given; and the rating scale of which the rating referred to in para- 10 graph (a) forms part.
(c) (1A) (2) (3) If an insurance intermediary, in arranging a contract of insur- ance 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 re- 15 lation to the proposed insurer, the insurer must be treated as having complied with that subsection.
If it is not reasonably practicable for a licensed insurer or insur- ance intermediary, as the case may be, to disclose the matters referred to in subsection (1) in writing and before the con- 20 tract is entered into or renewed, that subsection is deemed to have 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 those matters are disclosed to the policyholder in writ- ing as soon as it becomes practicable to do so.
For the purposes of this section, a matter is not to be taken as having been disclosed unless it is disclosed clearly and promi- nently.

25 30 (b) (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 $100,000.
Disclosure by insurers not required to be rated 65 (1) A licensed insurer that does not have a current financial 35 strength rating as a result of section 61(2)(a) must, before entering into a contract of insurance or renewing a contract 66 Insurance (Prudential Supervision) Bill Part 2 cl 66 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 the reason why it is not required to have a current finan- 5 cial strength rating.
(b) (1A) (2) (3) If an insurance intermediary, in arranging a contract of insur- ance 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 re- 10 lation to the proposed insurer, the insurer must be treated as having complied with that subsection.
If it is not reasonably practicable for a licensed insurer or insur- ance intermediary, as the case may be, to disclose the matters referred to in subsection (1) in writing and before the con- 15 tract is entered into or renewed, that subsection is be deemed to have must be treated as having been complied with if those matters are disclosed to the policyholder— (a) (b) For the purposes of this section, a matter is not to be taken as having been disclosed unless it is disclosed clearly and promi- nently.
orally before the contract is entered into or renewed; and in writing as soon as it becomes practicable to do so.

20 (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 25 exceeding $100,000.
66 (1) (2) Policyholder may cancel if disclosure is not made 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, 30 within 20 working days after the contract is entered into or renewed, cancel the contract by notice in writing to the insurer.
If a contract of insurance is cancelled under subsection (1), the New Zealand policyholder ceases to be liable for the pay- ment of any premiums relating to the period commencing on 35 the date on which the contract is cancelled and ending on the date on which the contract would have terminated, and any 67 Part 2 cl 67 Insurance (Prudential Supervision) Bill premiums paid by the policyholder to the insurer or any inter- mediary that relate to that period must be repaid to the policy- holder by the insurer.
67 (1) (2) Disclosure of rating on licensed insurer’s Internet site If an Internet site that is maintained by, or on behalf of, a speci- 5 fied 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) (ii) the insurer’s current financial strength rating; and 10 the name of the agency by which the rating was given; and the rating scale of which the rating referred to in subparagraph (i) forms part; or (iii) (b) contains a prominent link to another Internet site that 15 clearly and prominently states the matters specified in paragraph (a).
In this section, a specified licensed insurer means a licensed insurer that is required to comply with section 61(1) or that otherwise has a current financial strength rating given by an 20 approved rating agency.
Other advertising of ratings 68 (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 25 prominently— (a) (b) the rating; and the name of the agency by which the rating was given; and that any scale of which the rating forms part is available 30 for inspection at every office in New Zealand of the insurer.
(c) For the purposes of this section and section 70, an advertise- ment is distributed if it is communicated to the public in New Zealand (with a view to obtaining business from New Zealand 35 policyholders) by newspaper, magazine, brochure, pamphlet, (2) 68 Insurance (Prudential Supervision) Bill Part 2 cl 69 notice, circular, radio or television broadcast, film, the Inter- net, 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).
5 69 69 (1) Licensed insurer must disclose downgrading in rating to policyholders under contracts of insurance with duration of more than 1 year If a licensed insurer’s financial strength rating is downgraded, the insurer must, within 60 working days of the downgrading, 10 disclose in writing the following matters to every New Zealand policyholder under a contract of insurance with the insurer that has a duration of more than 1 year (if any): (a) a statement to the effect that the insurer’s financial strength rating has been downgraded: the insurer’s current financial strength rating: the name of the agency by which the rating was given: the rating scale of which the rating referred to in para- graph (b) forms part.
(b) (c) (d) Licensed insurer must give public notice of downgrade or notice to policyholders 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 30 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 35 downgrading of the rating.
In this section, public notice means the notice is published— (3) 69 15 20 25 Part 2 cl 70 Insurance (Prudential Supervision) Bill (a) (b) in 1 or more daily newspapers circulating in each of the cities of Auckland, Hamilton, Wellington, Christchurch, and Dunedin; and on an Internet site maintained by, or on behalf of, the licensed insurer.
70 Licensed insurer must not disclose or advertise ratings from non-approved agencies (1) A licensed insurer must not— (a) (b) disclose to a New Zealand policyholder a rating from a non-approved agency; or distribute an advertisement relating to any of the in- surer’s insurance products that refers to a rating from a non-approved agency.

5 10 Subsection (1)(a) does not apply in respect of a disclosure to any policyholder that is a related party or an employee of the 15 insurer.
In this section, rating from a non-approved agency means, in relation to a licensed insurer, an assessment of its finan- cial strength or creditworthiness that is in substance a financial strength rating or credit rating (whether called a rating, grad- 20 ing, scoring, ranking, or by any other name) that is issued or given by an agency that is not an approved rating agency.
Offence to fail to comply with disclosure obligations 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 25 conviction, to a fine not exceeding $500,000.
Disclosure of overseas policyholder preference Overseas insurer must disclose overseas policyholder preference If an overseas policyholder preference may apply in respect of 30 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 pre- scribed.
(2) (3) 71 72 (1) 70 Insurance (Prudential Supervision) Bill Part 2 cl 73 (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.

Risk management 73 Licensed insurer must be subject to and comply with risk 5 management programme (1) A licensed insurer must be subject to a risk management pro- gramme and take all practicable steps to comply with that pro- gramme.
The risk management programme must— (a) (b) (2) 10 15 be in writing; and set out the procedures that the licensed insurer will use for the effective identification and management of the following risks: (i) (ii) (iii) (iv) market risk: (v) (vi) insurance risk: credit risk: liquidity risk: operational risk: a prescribed type of risk (being a type of risk that 20 is specified in the regulations to apply to the in- surer or to a specified class of insurers that in- cludes the insurer); and (c) (d) (e) 25 set out appropriate documentation and record-keeping requirements; and 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 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 li- censed insurer, its corporate structure (including its re- lationship with associated persons), its funding struc- 35 ture, the market sector in which it operates, and its busi- ness strategy).
30 71 Part 2 cl 74 Insurance (Prudential Supervision) Bill (3) The Bank may issue, in the manner that the Governor thinks fit, guidelines relating to the risk categories referred to in subsec- tion (2)(b) that must be covered by the risk management pro- gramme (being guidelines that do not have the force of law).

(4) A licensed insurer must obtain the Bank’s approval before its 5 risk management programme is amended in a material way.
(5) However, if it is not reasonably practicable for a licensed in- surer to obtain the Bank’s approval before its risk management programme is amended in a material way (for example, be- cause the amendment needs to be made urgently),— (a) the insurer may amend the risk management pro- gramme before obtaining the approval; but the amendment ceases to have effect if— (i) (b) 10 the insurer fails to notify the Bank of the amend- ment within 5 working days after the amendment 15 is made; or the Bank does not give its approval to the amend- ment within 5 working days after being notified of the amendment.
(ii) 74 (1) Group risk management programme If a licensed insurer is part of a group of insurers, the risk man- agement programme that the insurer is required to be subject to may, at the option of the insurer, be a risk management pro- gramme that applies to the insurer and 1 or more other mem- bers of that group (a group programme).
20 25 (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 re- quirements of section 73(2) are complied with (in which case 30 the insurer’s risk management programme must be taken to be the group programme together with the supplementary docu- ment).
72 Insurance (Prudential Supervision) Bill Part 2 cl 77 75 Offence to fail to comply with risk management requirements 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.

Appointment of actuary and actuarial review 76 Requirement for licensed insurers to have appointed actuary (1) A licensed insurer must have an actuary appointed by the in- surer.
5 10 (2) A licensed insurer may, at any time, appoint an alternate ac- tuary 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).

The licensed insurer must, within 6 weeks after a person 15 stops being an 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 147 or 190).
(3) (4) A licensed insurer must not appoint a person under subsec- 20 tion (1) or (2) unless the person is an actuary and is, in accord- ance 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 25 for services.
77 Review of actuarial information in, or used in the preparation of, financial statements (1) A licensed insurer must ensure that the actuarial information contained in, or used in the preparation of, the financial state- 30 ments of the insurer and any group financial statements re- ferred to in section 81(1) is reviewed by an the appointed actuary.

The review must be carried out in accordance with an applic- able solvency standard.
35 (2) 73 Part 2 cl 78 Insurance (Prudential Supervision) Bill (3) For the purposes of this section and section 78, actuarial information means— (a) information relating to an insurer’s calculations of pre- miums, claims, reserves, dividends, insurance and an- nuity rates, and technical provisions; and 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 information specified in an applicable solvency stand- ard as being actuarial information for the purposes of 10 this section.
5 (b) (c) (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 $500,000.
20 15 Appointed actuary’s report The appointed actuary’s report in respect of a review under section 77 must state— (a) (b) (c) (d) the actuary’s name; and the work done by the actuary; and the scope and limitations of the review; and the existence of any relationship (other than that of ac- tuary) that the actuary has with, or any interests that the actuary has in, the licensed insurer or any of its sub- sidiaries; and whether the actuary has obtained all information and 25 explanations that he or she has required; and whether, in the actuary’s opinion and from an actuarial perspective, the financial statements and any group fi- nancial statements comply with the solvency standards in respect of the actuarial information contained in them 30 or used in the preparation of them, and if they do not, the respects in which they fail to comply; and whether, in the actuary’s opinion and from an actuarial perspective,— (i) (e) (f) (f) the actuarial information contained in the finan- 35 cial statements and any group financial state- ments has been appropriately included in those 78 74 Insurance (Prudential Supervision) Bill Part 2 cl 80 (ii) statements (and if not, the respects in which it has been inappropriately included); and the actuarial information used in the preparation of the financial statements and any group finan- cial statements has been used appropriately (and 5 if not, the respects in which it has been used in- appropriately); and (h) (g) whether, in the actuary’s opinion and from an actuarial
 perspective, the licensed insurer is maintaining the sol- vency margin that applies under a condition imposed 10 under section 20(2)(b) (as at the balance date of the insurer); and in the case of a life insurer, whether, in the actuary’s opinion and from an actuarial perspective, the life in- surer is maintaining the solvency margins that apply in 15 respect of its statutory funds under a condition imposed under section 20(2)(c) (as at the balance date of the insurer).
79 20 Provisions relating to auditor’s report and audit conducted by auditor 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 pre- pared under section 78 when— (a) the auditor’s report is delivered for registration under 25 section 18 of that Act; and the auditor’s report is included in the insurer’s annual report (in the case of an insurer that includes the audi- tor’s report in its annual report).
(b) (2) If an auditor relies on an appointed actuary’s review, the audi- 30 tor’s report prepared under section 16 of the Financial Report- ing Act 1993 must summarise the extent to which the auditor has relied on the actuary’s review.

Access to information 80 (1) A licensed insurer must ensure that any specified actuary has 35 access at all times to the accounting records and other docu- ments of the insurer.
75 Part 2 cl 81 Insurance (Prudential Supervision) Bill (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 5 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 10 or to a fine not exceeding $200,000 (or both).
It is a defence to a director or an employee charged with an offence under subsection (4) if he or she proves that— (a) (5) (b) he or she did not have the information required in his or her possession or under his or her control; or 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.
In this section, specified actuary, in relation to a licensed in- surer, means— (a) (b) anthe appointed actuary; or an actuary that is appointed by or under any of the pro- visions of this Act to investigate, or otherwise prepare a report in respect of, the insurerperform or exercise any function, duty, or power in respect of the insurer.
15 20 25 (6) Supply of financial statements Financial statements must be given to Bank 81 (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 Fi- 30 nancial 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 a copy of the appointed actuary’s report prepared under 35 section 78 in respect of those statements is given to the Bank.
(b) 76 Insurance (Prudential Supervision) Bill Part 2 cl 82 (2) A licensed insurer must, within 5 months after the end of the first half of each accounting period of the insurer,— (a) (b) (c) prepare interim financial statements of the insurer for that half-period; and prepare interim group financial statements for a group 5 comprising the insurer and its subsidiaries for that half- period; and ensure that copies of those statements together with a copy of the auditor’s report on those statements (if any) are given— (i) (ii) to the Bank; and for registration to the Registrar (within the mean- ing of section 2(1) of the Financial Reporting Act 1993) if this is required by the regulations.
10 (2A) (3) In subsection (2), subsidiaries has the same meaning as in 15 section 2(1) of the Financial Reporting Act 1993.
The interim financial statements and interim group financial statements must— (a) (b) be audited if required by the regulations; and be prepared in accordance with requirements prescribed 20 by the regulations (which may, for example, require compliance with generally accepted accounting prac- tice (within the meaning of section 3 of the Financial Reporting Act 1993) in whole or in part and with any modifications, additions, or variations that may be pre- 25 scribed).
(3A) This section is subject to any exemption under section 229A(1)(a)(iii) in respect of any provision of this section.

(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 30 exceeding $100,000.
Subpart 3—Statutory funds of life insurers General requirements Requirement that life insurer have statutory funds 82 (1) A life insurer must at all times have at least 1 statutory fund 35 in respect of its life insurance business (but may have more statutory funds if it chooses to do so).
77 Part 2 cl 83 Insurance (Prudential Supervision) Bill (2) A statutory fund is a fund that— (3) 83 (1) (a) (b) is established in the records of a life insurer; and relates solely to the life insurance business of the life insurer or a particular part of that business.

This subpart does not apply to a life insurer that is included 5 in a class of insurers that is the subject of an exemption under section 229A(1)(a)(iv).
(b) (c) (d) (e) (f) Overview of requirements regarding statutory funds The principal requirements of this subpart in relation to statu- tory funds may be summarised as follows: (a) 10 all amounts received by a life insurer in respect of the business of a fund must be credited to the fund: all assets and investments related to the business of a fund must be included in the fund: all liabilities (including policy liabilities) of the life in- 15 surer arising out of the conduct of the business of a fund must be treated as liabilities of the fund: the assets of a fund are only available for expenditure related to the conduct of the business of the fund: funds may not be restructured or terminated without the 20 approval of the Bank: profits and losses of a fund may only be dealt with in accordance with sections 110 to 113 and the associ- ated regulations (the object of those sections and regu- lations being to ensure that such profits and losses are 25 dealt with in a manner that protects the interests of pol- icyholders 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.
30 84 Meaning of life policy (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 35 a contingency dependent on the termination or continu- ance of human life: 78 (b) (c) (d) Insurance (Prudential Supervision) Bill Part 2 cl 84 a contract of insurance that is subject to payment of premiums for a term dependent on the termination or continuance of human life: a contract of insurance that provides for the payment of an annuity for a term dependent on the continuance of 5 human life: 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) 10 the death, by accident or by some other cause stated in the contract, of the person whose life is insured (the insured person); or injury to, or a disability of, the policyholder in- sured person as a result of accident or sickness; 15 or the policyholder insured person being found to have a stated condition or disease: (ii) (iii) (da) (e) a contract of insurance that constitutes an investment account contract: a contract of insurance that constitutes an investment- linked contract (within the meaning of section 97).
20 (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 25 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 payment is only to be made in the event of— (i) (ii) death by accident; or death resulting from a specified sickness stated condition or disease.
(b) 30 (4) A contract of insurance is not a life policy if it is of a class (5) declared by the regulations not to be life policies.
In subsection (1)(da), investment account contract means 35 a contract that— (a) provides for benefits to be paid— (i) on death; or 79 Part 2 cl 85 Insurance (Prudential Supervision) Bill (ii) on a specified date or specified dates or on death before the specified date, or the last of the speci- fied 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 5 not to be reduced; and 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 (c) it provides for the account to be reduced otherwise than by 10 the amounts of withdrawals by the person responsible for the payment of premiums or by the amounts of charges payable under the contract.

Composite policies This section applies to contracts of insurance that provide for 15 both life insurance and non-life insurance.
For the purposes of this subpart,— (a) 20 if the proportion of the premium that relates to life in- surance is less than 25%, the contract of insurance must be treated as if it were not a life policy: if, in relation to an insurance product line, the propor- tion 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 pol- icy: if the proportion of the premium that relates to non-life insurance is less than 25%, the contract of insurance as a whole must be treated as if it were a life policy: if, in relation to an insurance product line, the propor- tion of the premiums that relate to non-life insurance 30 is less than 25%, each contract of insurance in the in- surance product line must be treated as if it were a life policy: in any other case, in relation to each contract of insur- ance 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 35 25 (a) (b) (b) (c) 85 (1) (2) 80 Insurance (Prudential Supervision) Bill Part 2 cl 86 (ii) (iii) life policy that is separate from the parts of the contract that do not relate to life insurance; and 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 5 life policy referred to in subparagraph (i); and for the purposes of subparagraphs (i) and (ii), the insurer must fairly apportion the premium be- tween those separate contracts.
(3) The proportion of the premium that relates premiums that re- 10 late to either life insurance or non-life insurance must be de- termined by the appointed actuary.

(4) (5) (3A) For the purposes of subsection (3), the appointed actuary must determine the proportions on the basis of premiums allo- cated, or expected to be allocated, as at the time that the con- 15 tracts of insurance are entered into.

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


In this section,— insurance product line means all contracts of insurance en- tered into by an insurer that have the same, or substantially the 20 same, terms and conditions life insurance means insurance of the kind described in sec- tion 84(1)(a) to (e) non-life insurance means insurance that is not life insurance.
86 (1) Interpretation in this subpart In this subpart, unless the context otherwise requires,— life insurance business means— (a) business that consists of either or both of the following: (i) (ii) the issuing of life policies: the undertaking of liability under life policies; 30 and 25 (b) any business that relates to business referred to in para- graph (a) (including, without limitation, business relat- ing to the investment, administration, and management of the assets of a statutory fund) 35 81 Part 2 cl 87 Insurance (Prudential Supervision) Bill policy document means a document that sets out, or the docu- ments that together set out, the terms of a contract that is a life policy, and includes an endorsement on such a document policy liability, in relation to a life insurer, means— (a) (b) a liability that has arisen under a life policy: a liability that, subject to the terms and conditions of a life policy, will arise on the happening of an event, or at a time, specified in the policy.
5 (2) A reference in this subpart to the business of a statutory fund (3) 87 (1) (2) of a life insurer is a reference to the life insurance business to 10 which the fund relates.
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 li- ability is of a kind that, under this subpart, may be dis- 15 charged out of the assets of the fund: 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: a life insurer issues a life policy when the insurer enters 20 into the contract that constitutes the policy.
(b) (c) Duty of life insurer in relation to statutory funds In the investment, administration, and management of the as- sets of a statutory fund, a life insurer— (a) must comply with this subpart; and (b) must give priority to the interests of policyholders of 25 life policies referable to the fund.
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 30 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, 35 it is reasonable to believe that the act or decision gives priority 82 Insurance (Prudential Supervision) Bill Part 2 cl 89 to the interests of policyholders of life policies referable to the fund.
(4) An investment by a life insurer is not ineffective merely be- cause it is made in contravention of subsection (1)(b).

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

(6) Nothing in subsection (1) prevents a life insurer doing any- thing that the life insurer is permitted by or under this subpart to do.
10 88 (1) (2) Notice to Bank when fund established If a life insurer establishes a statutory fund otherwise than under an approval given under section 107 or 108, the life insurer must give the Bank written notice of— the establishment of the fund; and (a) the date on which the fund was established; and (b) the nature of the life insurance business of the life in- (c) surer to which the fund relates; and any other prescribed matters.

(d) The notice must be given in the prescribed manner.
88A Life insurer must transfer assets on establishment A life insurer must transfer to a statutory fund on its estab- lishment assets of a value that is ascertained in the prescribed manner.
89 (1) Assets of statutory fund 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 91: assets of the life insurer obtained as a result of the ex- 30 penditure or application of money credited to the fund: investments held by the life insurer as a result of the ex- penditure or application of money credited to the fund: (b) (c) 15 20 25 83 Part 2 cl 90 Insurance (Prudential Supervision) Bill (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 5 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 10 the directors of a life insurer a trustee or trustees of the assets of the statutory funds of the life insurer.

Identification of life policies referable to statutory fund 90 (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 speci- fies— (a) the benefits under the policy that are to be provided out of each fund; and either— (i) (b) 15 20 the proportion of the premium that is related to the benefits to be provided out of each fund and 25 is to be credited to the fund; or the way in which that proportion is to be calcu- lated.
(ii) Subsection (1) does not prevent a policy document being endorsed so as to change the statutory fund or funds to which 30 the life policy is referable.

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, 35 this subpart has effect as if the notice were part of the policy document relating to the policy.
(4) (5) 84 Insurance (Prudential Supervision) Bill Part 2 cl 92 (6) During the period of 6 12 months beginning at the commence- ment of this section, subsection (1) does not apply to the pol- icy document relating to a life policy issued before the com- mencement of this section.
91 5 (a) (b) Payments to statutory fund The following amounts must be credited by a life insurer to a statutory fund: (ab) amounts that must, in accordance with the regulations, be credited to the statutory fund on its establishment: premiums payable under life policies referable solely to 10 the fund: 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: amounts paid to the life insurer in relation to a liability under section 103 or 105 in relation to the fund: income from the investment of assets of the fund: (d) (e) money paid to or by the life insurer to the credit of the (c) 15 fund under a judgment of a court relating to any matter 20 concerning the business of the fund or any failure to comply with this subpart in relation to the fund: any other money received by the life insurer in connec- tion with its conduct of the business of the fund.
(f) Capital payments to statutory funds 92 (1) Nothing in this subpart prevents a life insurer from making a 25 (2) capital payment to a statutory fund.

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) (b) is not required to be credited to the fund; and does not represent any part of the assets of another statu- tory fund.
30 85 Part 2 cl 93 Insurance (Prudential Supervision) Bill Expenditure and application of statutory fund 93 (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.
The assets of a statutory fund may only be applied by the life 5 insurer— (a) (2) to meet liabilities (including policy liabilities) or ex- penses incurred for the purposes of the business of the fund; or for the making of investments in accordance with sec- 10 tion 98; or for the purposes of a distribution under section 112 or 113.
(b) (c) (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 15 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 bor- rowing if the result would be that the total amount of principal outstanding under unsecured borrowings for the purposes of 20 the business of the fund would exceed an amount ascertained in the prescribed manner.
In subsection (4), unsecured borrowing does not include— a borrowing of money by means of a bank overdraft; or (a) a borrowing of money by means of a prescribed arrange- 25 (b) ment.
(5) (6) The assets of a statutory fund are not available to meet a liabil- ity 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 in- 30 surer of assets of the fund; and the investment was made in accordance with this sub- part.
(b) (7) Nothing in this section applies to the transfer of assets from one statutory fund to another in accordance with sections 35 107 to 109, or section 112 or 113.

86 Insurance (Prudential Supervision) Bill Part 2 cl 96 Prohibition of reinsurance between funds 94 (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.
For the purposes of subsection (1), the practice of reinsur- 5 ance between statutory funds consists of the following elem- ents: (a) (2) part of the premium payable under a life policy refer- able to one statutory fund is credited to another statutory fund to which the policy is not referable (the reinsuring 10 fund): 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.
(b) 15 (2) (3) 95 Effect of non-compliance with section 93: general (1) A transaction (other than a transaction to which section 96 applies) entered into in contravention of section 93 is of no effect.

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

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 pur- poses.
If the High Court is satisfied that the applicant entered into 25 the transaction in good faith and without knowledge of the contravention of section 93, the court may have regard to any hardship that would be caused to the applicant if an order were not made under subsection (3).

Subsection (4) does not limit the matters to which the High 30 Court may have regard on an application under subsection (3).
(5) (4) 20 96 Effect of non-compliance with section 93: certain classes of transactions (1) A transaction that is included in a class of transactions declared 35 by the regulations to be transactions to which this section ap- 87 Part 2 cl 97 Insurance (Prudential Supervision) Bill (2) (3) 97 (1) plies is not ineffective merely because it was entered into in contravention of section 93.
The High Court, on application by the Bank, may make an order declaring that a particular transaction entered into in contravention of section 93 is, and is to be taken always to 5 have been, of no effect for any purpose.
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 10 and without knowledge of the contravention.
Investment performance guarantee: limit of certain liabilities This section applies to a statutory fund if— (a) the business of the fund consists of includes the provi- 15 sion of investment-linked benefits; and any of the policies referable to the fund includes an in- vestment performance guarantee.

(b) (2) A life insurer must at all times ensure that the investment per- formance guarantee factor of a statutory fund to which this 20 section applies does not exceed 5%.
The investment performance guarantee factor of a statutory fund at a particular time is the proportion of the amount of the current policy liabilities of the fund at that time that represents the total cost, as at that time, of providing the investment per- 25 formance guarantees included in life policies referable to the fund.
For the purposes of this section,— (a) the amount of the current policy liabilities of a statutory fund at a particular time is the amount that, in accord- 30 ance with the regulations, is to be taken to be the value, at that time, of all policy liabilities of the life insurer in relation to policies referable to the fund; and the total cost, as at a particular time, of providing the investment performance guarantees included in policies 35 referable to a statutory fund is the amount calculated, as at that time, in accordance with the regulations.
(b) (3) (4) 88 Insurance (Prudential Supervision) Bill Part 2 cl 98 (5) (2) A life insurer must at all times comply with the restrictions on, and other requirements in respect of, the investment per- formance guarantee that are prescribed for the purposes of this section (if any).
In this section,— investment-linked benefits means benefits payable under an investment-linked contract investment-linked contract means a contract— (a) 5 the principal object of which is the provision of benefits calculated by reference to units the value of which is 10 related to the market value of a specified class or group of assets of the party by whom the benefits are to be provided; and that provides for benefits to be paid— (i) (ii) on death; or on a specified date or specified dates or on death before the specified date, or the last of the speci- fied dates, as the case may be 15 (b) investment performance guarantee, in relation to a life pol- icy, means a provision that the amount payable under the pol- 20 icy at a particular time by way of investment-linked benefits is not less than an amount specified in, or calculated in accord- ance with, the policy.
Investment of statutory funds 98 (1) A life insurer may invest the assets of a statutory fund in any 25 way that is likely to further the business of the fund.
(2) However, subsection (1) is subject to the following qualifi- cations: (a) (b) (c) nothing in this subpart authorises a life insurer to make an investment the life insurer would otherwise be pro- 30 hibited from making: nothing in this subpart authorises a life insurer to make an investment the life insurer would not otherwise have the power to make: except with the approval of the Bank, a life insurer must 35 not invest assets of a statutory fund in an associated person that is not a subsidiary of the life insurer: 89 Part 2 cl 99 Insurance (Prudential Supervision) Bill (d) a life insurer must not invest assets of a statutory fund, or keep assets of a statutory fund invested, in a sub- sidiary of the life insurer if the investment, or the reten- tion of the investment, as the case requires, is prohibited by the regulations.
5 (3) Nothing in subsection (2)(c) or (d) prevents a life insurer in- vesting assets of a statutory fund, or keeping assets of a statu- tory 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 10 invested does not exceed a prescribed percentage of the value of all assets of the fund.
(4) A transaction is not ineffective merely because it involves a contravention of subsection (2)(c) or (d).

(5) Nothing in this section— 15 (a) prevents a life insurer from investing money of a statu- tory fund by way of deposit with— (i) a registered bank (within the meaning of the Re- serve Bank of New Zealand Act 1989); or a bank that is authorised to accept deposits under 20 the law of an overseas jurisdiction; or (ii) (6) (7) (b) requires the approval of the Bank for such an invest- ment.
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 25 entered into.

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 30 2(1) of the Securities Markets Act 1988); or a stock exchange in an overseas jurisdiction.
(b) Recording of restricted investments 99 (1) A life insurer must, in the prescribed manner, keep a record of its restricted investments.
In this section, restricted investment— 35 (2) 90 Insurance (Prudential Supervision) Bill Part 2 cl 101 (a) means any investment of assets of a statutory fund of a (b) life insurer in a related party; but 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 5 1989), even though the bank is a related party of the life insurer concerned.
100 Transfer of assets between funds (1) A life insurer must not transfer an asset from one statutory fund to another statutory fund except in accordance with subsec- 10 tion (2), or sections 107 to 109, or section 112 or 113.
(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 15 losing fund an amount equal to the fair value of the asset; and 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.
20 (b) (3) (4) 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.

Subsection (1) does not prevent a liquidator doing anything 25 authorised or required by or under any enactment.
101 Restriction on restructure or termination of statutory funds (1) A life insurer must not change the statutory fund or funds to which a life policy is referable, or terminate a statutory fund, 30 except in accordance with sections 90(4) and 109 or sec- tion 107 or 108.

Subsection (1) does not prevent a liquidator doing anything authorised or required by or under any enactment.
(2) 91 Part 2 cl 102 Insurance (Prudential Supervision) Bill 102 Ascertainment of income and outgoings of statutory fund The Governor-General may, by Order in Council, on the ad- (1) vice of the Minister given in accordance with a recommenda- tion of the Bank, make regulations that specify— (a) (b) what constitutes outgoings of a statutory fund.
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; and what constitutes income of a statutory fund must be de- termined in accordance with the regulations; and (b) what constitutes outgoings of a statutory fund must be determined in accordance with the regulations.
(2) 5 10 Duties and liabilities of directors, etc 103 Duty of directors in relation to statutory funds (1) A director of a life insurer has a duty to the policyholders of 15 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) (b) complies with this subpart; and gives priority to the interests of policyholders of life policies referable to the fund.
20 (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 25 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 pol- icyholders of life policies referable to a statutory fund is a ref- 30 erence 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.
If, in respect of any act or omission of a life insurer, a director 35 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 (5) 92 Insurance (Prudential Supervision) Bill Part 2 cl 104 (6) 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.
If 2 or more persons are liable under subsection (5) in rela- tion to the same act or omission, the liability of those persons is joint and several.

(7) An action under subsection (5) may be brought— by the life insurer; or (a) (b) with the written approval of the Bank, by the policy- holder of a life policy referable to the statutory fund in- volved.
5 10 (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 sec- tion and under section 105 in respect of the same act or omis- 15 sion 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 en- actment are subject to this section to the effect that the director 20 will not be in breach of those duties as a result of complying with the duties imposed under this section).
104 Bank may give notice (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 25 insurer, within a specified period, to take the action that is specified in the notice to remedy the failure.

The period specified in the notice must be a period ending not earlier than 1 month after the giving of the notice.
The action to be specified in the notice is the action that the 30 Bank thinks appropriate and reasonable to overcome the ef- fects of the failure to comply.

(2) (3) (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.

35 (5) A life insurer must comply with a notice under subsection (1).
93 Part 2 cl 105 Insurance (Prudential Supervision) Bill 105 Liability of directors (1) Subsection (2) applies if— (a) the Bank has given a notice to a life insurer under sec- tion 104 in respect of a contravention of this subpart; and the contravention has resulted in a loss to a statutory fund; and the life insurer has failed to comply with the notice within the period specified in it or within that period as extended under section 104(4).
5 10 (b) (c) (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 15 proves that he or she used due diligence to prevent the oc- currence of the contravention or to ensure that the life insurer complied with the notice.
106 Bank’s power to sue in name of life insurer (1) If the Bank thinks that it is in the interests of the policyholders 20 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 105.

In an action under subsection (1), the court may make any 25 order in the matter as to costs and otherwise as it thinks fit.
(2) Restructure and termination of statutory funds 107 Restructure of statutory funds (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 30 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).

If the application is approved, the restructure may take place in accordance with any conditions that the Bank may impose.
35 (2) 94 Insurance (Prudential Supervision) Bill Part 2 cl 107 (3) The conditions may include (without limitation) conditions re- lating to the following: (a) a requirement to notify interested persons of the out- come of the application: (b) matters connected with how the restructure takes place, 5 (4) (5) (6) including the following: (i) (ii) (iii) life policies becoming referable to a receiving fund or funds: policy liabilities and other liabilities becoming referable to a receiving fund or funds: assets of a transferring fund becoming assets of a receiving fund or funds: the timing of the restructure: if a receiving fund is a proposed new statutory fund, the establishment of that fund.
The Bank must not approve the application if it considers that— (a) (iv) (v) 10 15 the restructure will result in unfairness to the policy- holders of life policies referable to a transferring fund or a receiving fund when those policyholders are viewed 20 as a group; or immediately after the restructure,— (i) the life insurer will fail to maintain a solvency margin in respect of a transferring fund; or the life insurer will fail to maintain a solvency 25 margin in respect of a receiving fund; or the life insurer is being liquidated or wound up when the application is made.
(ii) (b) (c) Subsection (4)(b)(i) does not apply if the transferring fund is to be wound up.

In this section,— receiving fund means the fund, or each fund, to which the life policies will become referable after a restructure transferring fund means the fund, or each fund, to which the life policies are referable before a restructure.
30 35 95 Part 2 cl 108 Insurance (Prudential Supervision) Bill 108 Termination of statutory funds (1) A life insurer may apply to the Bank to terminate 1 or more of (2) (3) (4) its statutory funds.

If the application is approved, the termination may take place in accordance with any conditions that the Bank may impose.
5 The conditions may include (without limitation) conditions re- lating 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, 10 including the following: (i) (ii) (iii) distribution or application of assets: settling of liabilities: the timing of the termination.
The Bank must not approve the application if it considers 15 that— (a) the termination will result in unfairness to the policy- holders of life policies referable to the fund or funds when those policyholders are viewed as a group; or the life insurer is being liquidated or wound up when 20 the application is made.
(b) Additional requirements for transfer of life policies between statutory funds by endorsement 109 Additional requirements for transfer of life policies (1) between statutory funds by endorsement Subsection (2) applies if— (a) (b) a life insurer has more than 1 statutory fund; and because of an endorsement referred to in section 90(4), either— (i) 25 a life policy has ceased to be referable to one 30 of those funds and become referable to another fund; or a life policy referable to 1 or more of those funds has become referable to a further fund or funds.
(ii) (2) The life insurer must transfer to each fund to which the policy 35 has become referable assets of a value equivalent to such part 96 Insurance (Prudential Supervision) Bill Part 2 cl 112 (3) (4) of the liabilities of the life insurer as is ascertained in the pre- scribed manner.
If, because of an endorsement referred to in section 90(4), a life policy that is referable to a statutory fund becomes refer- able to another statutory fund, or a life policy that is referable 5 to 1 statutory fund becomes referable to 2 or more statutory funds, the life insurer concerned must give notice to the pol- icyholder of the policy in the prescribed manner.
In this section, liabilities, in relation to a life insurer, means— (a) (b) (c) policy liabilities; and reserves; and any other liabilities of the life insurer.
10 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 15 accordance with prescribed requirements A life insurer must, in the prescribed circumstances and in the prescribed manner, allocate the operating profit or operating loss of a category of business of a statutory fund.
111 Allocation of capital (1) A life insurer must allocate to shareholders’ or members’ cap- ital of a statutory fund all capital payments made to the fund under section 92.

20 (2) A life insurer allocates a capital payment by— (a) (b) identifying in its financial statements prepared as at the 25 end of the period in which the payment was made the amount of the payment; and identifying that amount as an amount that should be added to shareholders’ or members’ capital.
112 Distribution of retained profits 30 The distribution of retained profits of a statutory fund must be made in accordance with the prescribed requirements.

97 Part 2 cl 113 Insurance (Prudential Supervision) Bill 113 Distribution of shareholders’ or members’ capital A distribution of shareholders’ or members’ capital in relation to a statutory fund may be made only in accordance with the prescribed requirements.
Application of statutory fund assets on liquidation or winding up 5 114 Application of statutory fund assets (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 10 the order of priority in which they are listed: (a) (b) (c) (d) the fees and expenses properly incurred by the liquid- ator in carrying out the duties and exercising the powers of the liquidator, and the remuneration of the liquidator: the reasonable costs of a person who applied to a court 15 for an order that the insurer be put into liquidation or wound up, including the reasonable costs incurred be- tween lawyer and client in procuring the order: the actual out-of-pocket expenses necessarily incurred by any liquidation committee: to any creditor who protects, preserves the value of, or recovers assets of the insurer primary fund for the bene- fit 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 real- 25 isation of those assets, up to the value of that creditor’s unsecured debt; and the amount of the costs incurred by that creditor in protecting, preserving the value of, or recov- ering those assets.
(ii) 30 20 In this section, liquidator includes a person who is occupying the position of a liquidator of the insurer by whatever name called.

Subsection (1) has effect only to the extent that expenses, fees, debts, and claims are liabilities that are referable to the 35 business of the primary fund.
(2) (3) 98 Insurance (Prudential Supervision) Bill Part 2 cl 114 (4) If any assets remain after the application of subsection (1), the assets must be applied according to the following rules: (a) (b) (c) (d) the assets are to be applied first in discharge of policy li- abilities of the life insurer referable to the primary fund: if any assets remain, they are to be applied in discharge 5 of other liabilities that are referable to the business of the primary fund: if, after the application of assets according to para- graphs (a) and (b), any assets of the primary fund re- main, those assets are to be applied in such manner as 10 the manner that the High Court directs.
directions given for the purpose of paragraph (c) are to be the directions that the High Court considers equit- able, having regard to— (i) the interests of the policyholders of life policies 15 referable to the primary fund; and the interests of the policyholders of life policies referable to statutory funds of the life insurer other than the primary fund; and the interests of creditors of the life insurer whose 20 debts have not been discharged by the application of assets according to paragraph (b); and the interests of shareholders or members of the life insurer.
(ii) (iii) (iv) (4A) (4B) If, for the purposes of subsection (4)(a), the assets are in- 25 sufficient to discharge all of the policy liabilities of the life insurer referable to the primary fund, the assets are to be ap- plied in discharge of those policy liabilities in the manner that the High Court directs.
If, for the purposes of subsection (4)(b), the assets are insuf- 30 ficient to discharge all of the other liabilities that are referable to the business of the primary fund, the assets are to be ap- plied in discharge of those liabilities in the manner that the High Court directs.
(4C) Directions given for the purpose of subsection (4)(c), (4A), 35 or (4B) are to be the directions that the High Court considers equitable, having regard to,— (a) in the case of subsection (4)(c),— 99 Part 2 cl 115 Insurance (Prudential Supervision) Bill (i) (ii) (iii) (iv) the interests of the policyholders of life policies referable to the primary fund; and the interests of the policyholders of life policies referable to statutory funds of the life insurer other than the primary fund; and 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 the interests of shareholders or members of the life insurer: (b) (c) in the case of subsection (4A), the interests of the pol- icyholders of life policies referable to the primary fund: in the case of subsection (4B), the interests of credit- ors in respect of the other liabilities that are referable to the business of the primary fund.
5 10 15 (5) (6) (7) (8) (9) 20 The reference in subsection (4)(d)(iii) (4C)(a)(iii) to credit- ors of a life insurer is not limited to creditors to whom amounts are due in relation to the business of a statutory fund, but in- cludes all creditors of a life insurer, whatever the nature of the liabilities involved.
If a liability of the life insurer is referable to 2 or more statu- tory 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 25 each of the statutory funds or by the statutory fund, as the case may be.
In making an apportionment under subsection (6), the liquid- ator must comply with any directions of the High Court.

The part of the amount so determined in relation to a statutory 30 fund is to be treated as a liability of the life insurer that is referable to the business of the fund.

This section applies despite anything to the contrary in the Companies Act 1993.
Liability of directors for loss to statutory fund 35 115 Liability of directors for loss to statutory fund (1) Subsection (2) applies if— 100 Insurance (Prudential Supervision) Bill Part 2 cl 117 (a) (b) (c) a life insurer contravenes this subpart in relation to a statutory fund; and the contravention results in a loss to the statutory fund; and the life insurer has been put into liquidation or is other- 5 wise 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 10 proves that he or she used due diligence to prevent the occur- rence 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 103 to 106 in respect of the same contraven- tion.
15 Offence 116 Offence to fail to comply with subpart (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.

Section 212 (which relates to the liability of directors) does not apply in respect of an offence under this section.
(2) 20 25 117 Bank may exempt overseas insurers from compliance Exemptions (1) (2) with subpart The Bank may, by notice to an overseas insurer, exempt the insurer (and its directors) from compliance with this subpart.
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 busi- 35 30 101 Part 3 cl 118 Insurance (Prudential Supervision) Bill (b) (c) ness, a statutory fund or other arrangement for separat- ing its life insurance obligations from its other obliga- tions; and there is no overseas policyholder preference in relation to payments out of, or in respect of, the statutory fund 5 or arrangement; and the nature and extent of prudential supervision that ap- plies 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 super- 10 vision that applies in respect of statutory funds under this subpart.
(2A) The matters in subsection (2) must be treated as being satis- fied in respect of an overseas insurer that is incorporated in a jurisdiction that is prescribed for the purposes of this subsec- 15 tion.

This section is subject to section 228 (which provides for general provisions relating to exemptions).
(3) Part 3 Prudential supervision of licensed insurers Bank to undertake prudential supervision 20 118 Prudential supervision The Bank must in accordance with this Part undertake pruden- tial supervision of licensed insurers.
25 Supply of information Supply of information by licensed insurers for purposes of prudential supervision For the purposes of this Act, the Bank may, by notice in writ- ing to any licensed insurer, require the insurer to supply to the 30 Bank any information, data, or forecasts about any matters re- lating to the business, operation, or management of the insurer.
For the purposes of this Part, a reference to matters relating to the business, operation, or management of a person includes the corporate, financial, or prudential matters of the person.

35 119 (1) (2) 102 Insurance (Prudential Supervision) Bill Part 3 cl 121 (3) A licensed insurer may be required to supply information, data, or forecasts— (a) relating to business carried on by the insurer in New Zealand or elsewhere (or both); and in a consolidated form (if specified by the Bank).
(4) (b) The notice may specify— (a) the periods for which, and the form in which, the infor- mation, data, or forecasts must be supplied; and the time by which, and the manner in which, the infor- mation, data, or forecasts must be supplied.

(b) 5 10 (5) The Bank may, by a subsequent notice, vary, revoke, or amend a notice.
(6) A licensed insurer commits an offence if the insurer fails to comply with any requirements of the Bank under this section and is liable, on summary conviction, to a fine not exceeding 15 $500,000.

120 Notice may require supply of information, data, or forecasts in relation to associated persons The Bank may, by notice under section 119, require a li- censed insurer to supply information, data, or forecasts in re- 20 lation to any associated person of the licensed insurer.
121 Associated persons may be required to supply information to licensed insurers (1) An associated person of a licensed insurer must, on being re- quired by the insurer to do so, supply the insurer with informa- 25 tion, data, or forecasts relating to the person in order to enable the insurer to comply with a notice under section 119.
(2) A person commits an offence if the person fails to comply with this section and is liable, on summary conviction,— (a) in the case of an individual, to imprisonment for a 30 term not exceeding 3 months or to a fine not exceeding $200,000 (or both): in the case of a body corporate, to a fine not exceeding $500,000.
(b) 103 Part 3 cl 122 Insurance (Prudential Supervision) Bill 122 Supply of information by other persons for purposes of (1) (2) prudential supervision If the Bank has reasonable grounds to believe that a person has information, data, or forecasts that the Bank could require a licensed insurer to supply under section 119, it may, by 5 notice in writing to the person, require the person to supply the information, data, or forecasts to the Bank.
The notice may specify— (a) the periods for which, and the form in which, the infor- mation, data, or forecasts must be supplied; and the time by which, and the manner in which, the infor- mation, data, or forecasts must be supplied.

(b) 10 (3) The Bank may, by a subsequent notice, vary, revoke, or amend a notice.
(4) A person commits an offence if the person fails to comply with 15 any requirements of the Bank under this section and is liable, on summary conviction,— (a) in the case of an individual, to a fine not exceeding $50,000: in the case of a body corporate, to a fine not exceeding 20 $100,000.
(b) 123 Requirement that information, data, or forecasts be (1) audited or reviewed The Bank may, by notice in writing, require a licensed insurer or other person to obtain an audit or a review, by an auditor, 25 actuary, or other person approved by the Bank, of any infor- mation, data, or forecasts that the insurer or other person, as the case may be, is required to supply under section 119 or 122.
(2) A licensed insurer or other person commits an offence if the 30 insurer or person fails to comply with this section and is liable, on summary conviction,— (a) in the case of an individual, to a fine not exceeding $50,000: in the case of a body corporate, to a fine not exceeding 35 $100,000.
(b) 104 Insurance (Prudential Supervision) Bill Part 3 cl 125 124 Bank may require report relating to licensed insurers or (1) associated persons The Bank may, by notice in writing to a licensed insurer, re- quire the insurer to supply the Bank with a report or series of reports, prepared by a person approved by the Bank, on any 5 matters relating to the business, operation, or management of either or both of the following: (a) (b) the insurer: any associated person of the insurer.
(1A) The notice under subsection (1) must contain a statement of 10 the reasons why the Bank wants the report or series of reports to be supplied.

(2) An associated person of the licensed insurer must, if required to do so by the insurer, supply information relating to the per- son in order to enable the insurer to comply with a notice under 15 this section.
(3) A licensed insurer or an associated person of the insurer com- mits an offence if the insurer or person fails to comply with this section and is liable, on summary conviction,— (a) in the case of an individual, to imprisonment for a 20 term not exceeding 3 months or to a fine not exceeding $200,000 (or both): in the case of a body corporate, to a fine not exceeding $500,000.
(b) 125 Disclosure of information to Bank by auditors and 25 actuaries Every person who holds, or at any time has held, office as re- quired by any enactment, as an auditor of a licensed insurer or of an associated person of a licensed insurer or as an ap- pointed actuary, must disclose to the Bank information relat- 30 ing to the affairs of the insurer or associated person obtained in the course of holding that office if, in the opinion of that person,— (a) the licensed insurer or associated person— (i) (i) is insolvent or is likely to become insolvent; or is failing to maintain a solvency margin or is likely to fail to maintain a solvency margin at any time within the next 3 years; or 35 105 Part 3 cl 126 Insurance (Prudential Supervision) Bill (ii) (iii) is in serious financial difficulties; or is, or has been, operating fraudulently or reck- lessly; and (b) the disclosure of that information is likely to assist, or be relevant to, the exercise by the Bank of its powers 5 under this Act.
126 Auditor or actuary to inform of intention to disclose Every auditor or actuary must, before disclosing any informa- tion to the Bank under section 125, take reasonable steps to inform the licensed insurer or associated person of the inten- 10 tion to disclose the information and the nature of the informa- tion.
127 Protection of auditors and actuaries (1) No civil, criminal, or disciplinary proceedings lie against any auditor or actuary arising from the disclosure in good faith of 15 information to the Bank under section 125.

(2) No tribunal, body, or authority having jurisdiction in respect of the professional conduct of any auditor or actuary may make any order against, or do any act in relation to, that person in respect of the disclosure referred to in subsection (1).
(3) No information received by the Bank under section 125 is admissible in evidence in any proceedings against the auditor or actuary concerned.

(4) Nothing in subsection (3) limits the admissibility of any in- formation obtained in any other way.
20 25 Investigations Investigations Subsection (2) applies if the Bank has reasonable cause to suspect that 1 or more of the following applies: (a) a licensed insurer has failed, is failing, or is likely to fail 30 to maintain a solvency margin: the business of a licensed insurer has not been, or is not being, conducted in a prudent manner: a licensed insurer has been or is operating fraudulently or recklessly: 35 (b) (c) 128 (1) 106 Insurance (Prudential Supervision) Bill Part 3 cl 129 (d) (e) a licensed insurer or an associated person has failed to comply with any requirement to supply information, data, or forecasts under this Part, or any information or data supplied by the insurer or person under this Part is false or misleading in a material particular: a licensed insurer has failed, is failing, or is likely to fail to comply with any direction, condition, or any other requirement imposed by or under this Act or the regu- lations.
5 The Bank may do either or both of the following if it considers 10 it is reasonably necessary for the purposes of carrying out its functions and exercising its powers under this Act: (a) by notice in writing to the licensed insurer or associated person, require the insurer or person to supply to the Bank, within the time specified in the notice, the infor- 15 mation or data specified in the notice: appoint, in writing, any suitably qualified person (an investigator) to carry out an investigation of the affairs of the licensed insurer or associated person.
(b) (2) (3) A licensed insurer or an associated person commits an offence 20 if the insurer or person fails to comply with any requirement of the Bank under subsection (2)(a) 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 25 $200,000 (or both): in the case of a body corporate, to a fine not exceeding $500,000.
(b) 129 Power to obtain information or documents (1) An investigator may, for the purposes of carrying out an in- 30 vestigation of the affairs of a licensed insurer or an associated person,— (a) by notice in writing, require the insurer or associated person, or any officer or employee of the insurer or as- sociated person, or any other person, to— (i) supply any information or data relating to the business, operation, or management of the in- surer or associated person: 35 107 Part 3 cl 130 Insurance (Prudential Supervision) Bill (ii) (iii) produce for inspection any documents of or re- lating to the business, operation, or management of the insurer or associated person that are in the custody or under the control of the insurer or as- sociated person, officer, employee, or other per- 5 son: if necessary, reproduce in usable form any infor- mation recorded or stored in those documents: (b) take copies of any documents produced for inspection under paragraph (a).
10 (2) An investigator who exercises any powers conferred by sub- section (1) must, if requested, produce the instrument of the investigator’s appointment.

130 Power to enter and search place (1) An investigator may, for the purposes of carrying out an in- 15 vestigation of the affairs of a licensed insurer or an associated person, enter and search any place if— (a) (b) the occupier of the place consents; or the investigator obtains a warrant under this section.
(2) A Judge of the High Court or a District Court Judge who is 20 satisfied, on the application of the investigator, that there are reasonable grounds for believing that 1 or more of the follow- ing applies may issue a warrant to the investigator: (a) that it is reasonably necessary for the purpose of deter- mining whether to exercise any powers conferred on the 25 Bank under this Act that an investigation of the affairs of a licensed insurer or an associated person should be carried out: that a licensed insurer or another person has failed to comply with any requirement to supply information, 30 data, or forecasts under this Part, or any information, data, or forecasts supplied by the insurer or other per- son under this Part are false or misleading in a material particular: that a licensed insurer has failed, is failing, or is likely 35 to fail to comply with any direction, condition, or other requirement imposed by or under this Act or the regu- lations.
(b) (c) 108 Insurance (Prudential Supervision) Bill Part 3 cl 132 (3) Schedule 2 applies for the purposes of this section.

131 Offences in relation to investigations (1) Every person commits an offence who— (a) hinders, obstructs, or delays an investigator in the carry- ing out of an investigation under this Act; or fails to comply with any lawful requirement of an in- vestigator.
5 (2) A person who commits an offence under this section is liable on summary conviction,— (a) in the case of an individual, to imprisonment for a 10 term not exceeding 3 months or to a fine not exceeding $200,000 (or both): in the case of a body corporate, to a fine not exceeding $500,000.
(b) (b) 132 Effect of final decision that exercise of powers under 15 sections 128 and 129 unlawful In any case where it is declared in a final decision given in any proceedings in respect of the exercise of powers conferred by sections 128 and 129 that the exercise of any powers conferred by those sections is unlawful, to the extent to which 20 the exercise of those powers is declared unlawful,— (a) the Bank must ensure that as soon as is reasonably prac- ticable after the decision of the court is given— (i) any information or data supplied by the licensed insurer or person under section 128(2)(a) or 25 129(1)(a) is destroyed: any documents or extracts from documents ob- tained pursuant to an inspection made under sec- tion 129(1)(a) are returned to the person previ- ously having possession of those documents or 30 previously having them under his or her control, and any copies of those documents or extracts are destroyed: any information derived from or based upon any such information and data or documents or ex- 35 tracts is destroyed: (ii) (iii) 109 Part 3 cl 133 Insurance (Prudential Supervision) Bill (b) no information or data supplied by the licensed insurer or person under section 128(2)(a) or 129(1)(a), and no documents or extracts from documents obtained under section 129(1)(a),— (i) (ii) may be used in connection with the exercise of are admissible in evidence in any proceedings: any power conferred by Part 4 or 5.
Miscellaneous provisions 133 Confidentiality of information, data, documents, and forecasts This section applies to— (a) the Bank; or an investigator: information, data, documents, and forecasts supplied or disclosed to or obtained by the following under, or for the purposes of, or in connection with the exercise of powers conferred by, this Act: (i) (ii) information and data derived from or based upon in- formation, data, documents, and forecasts referred to in paragraph (a): information relating to the exercise, or possible exer- cise, of the powers conferred by this Act.
The Bank may publish or disclose any information or data, data, document, or forecast to which this section applies only if— (a) the information or data is, data, document, or forecast is available to the public under any Act or is otherwise publicly available information; or the information or data or forecast is in a statistical or summary form; or the publication or disclosure of the information or data, data, document, or forecast is for the purposes of, or in connection with, the performance or exercise of any function or power conferred by this Act or any other enactment; or the publication or disclosure of the information or data, data, document, or forecast is to any authority or body in any other country that exercises performs functions (b) (c) (b) (c) (d) (1) (2) 110 Insurance (Prudential Supervision) Bill Part 3 cl 134 5 that correspond with, or are similar to, those conferred on the Bank under this Act, and the Bank is satisfied that the information or data, data, document, or forecast will only be used by that authority or body for the purpose of exercising performing those functions; or the publication or disclosure of the information or data, data, document, or forecast is to any person that the Bank is satisfied has a proper interest in receiving the information, data, document, or forecast; or the publication or disclosure of the information or data 10 is with the consent of the person to whom the informa- tion relates or of the person to whom the information is confidential.
the publication or disclosure of the information, data, document, or forecast is with the consent of the person 15 to whom that material relates or of the person to whom that material is confidential.

(e) (f) (f) (3) The Bank must not publish or disclose information or data, data, a document, or a forecast under subsection (2)(d) or (e) unless the Bank is satisfied that appropriate provision exists to 20 protect the confidentiality of that information or data material.
(4) An officer or employee of the Bank or an investigator must not publish or disclose any information or data, data, document, or forecast to which this section applies except for the purposes of, or in connection with, the performance or exercise of any 25 function or power conferred by this Act or any other enact- ment.
(5) An officer or employee of the Bank or an investigator com- mits an offence if the officer, employee, or investigator fails to comply with this section and is liable, on summary conviction, 30 to imprisonment for a term not exceeding 3 months or to a fine not exceeding $200,000 (or both).
134 Limits on further disclosure of information, data, documents, or forecasts (1) A person to whom any information or data, data, document, or 35 forecast is published or disclosed under section 133(2)(c), (e), or (f) must not publish, disclose, or use that information 111 Part 3 cl 135 Insurance (Prudential Supervision) Bill or data, data, document, or forecast unless the publication, dis- closure, or use is,— (a) in the case of a publication or disclosure under section 133(2)(c),— (i) for the purposes of, or in connection with, the 5 performance or exercise of functions or powers conferred by this Act or any other enactment; and in accordance with any conditions that may be imposed by the Bank: (ii) (b) in the case of a publication or disclosure under section 10 133(2)(e),— (i) authorised by the Bank and in accordance with any conditions that the Bank may have imposed; or necessary or desirable for the performance or ex- 15 ercise of any function or power conferred by any enactment: (ii) (c) in the case of a publication or disclosure under section 133(2)(f), in accordance with the terms and conditions of the consent referred to in that paragraph.
(2) A person commits an offence if the person fails to comply with this section 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): in the case of a body corporate, to a fine not exceeding $500,000.
(b) 20 25 135 Application of other enactments to information, data, documents, or forecasts published or disclosed under section 133 Nothing in any Act, other than this Act or the Official Informa- tion Act 1982 or the Local Government Official Information and Meetings Act 1987, requires the Bank or any person to whom information or data, data, a document, or a forecast has been published or disclosed under section 133 to make that 35 information or data, data, document, or forecast available to any other person.
30 112 Insurance (Prudential Supervision) Bill Part 4 cl 136 Part 4 Distress management Subpart 1—Recovery plans 136 Bank may require licensed insurer to prepare recovery (1) (2) plan The Bank may give a licensed insurer a written direction to prepare a recovery plan if the Bank has reasonable grounds to believe that 1 or more of the following applies: (a) the insurer has failed, is failing, or is likely to fail to maintain a solvency margin: the business of the insurer has not been, or is not being, conducted in a prudent manner: the insurer has failed, is failing, or is likely to fail to comply with any direction, condition, or other require- ment imposed by or under this Act or the regulations.
(b) (c) 5 10 15 The recovery plan must— (a) (b) be in writing; and set out the actions that the licensed insurer will take to effectively address the matters that caused the Bank to give the direction and, in particular, to ensure that (as 20 the case may be)— (i) the insurer maintains its solvency margin and, in the case of a life insurer, the insurer also main- tains the solvency margin or margins that apply in respect of its statutory funds: the business of the insurer is conducted in a pru- dent manner: the insurer comes back into compliance, or re- mains compliant with, any direction, condition, or other requirement referred to in subsection 30 (1)(c); and 25 (ii) (iii) (c) (d) set out an appropriate timetable for taking those actions to ensure that those actions are taken as soon as practic- able; and describe the steps that the licensed insurer will take to 35 ensure that the plan remains current, which must include procedures for regular review of the plan to systemat- 113 Part 4 cl 137 Insurance (Prudential Supervision) Bill (f) (e) (g) ically identify deficiencies in the effectiveness of the plan; and be appropriate to the operations of the licensed insurer, having regard to the size of the insurer, its corporate structure (including its relationship with associated per- 5 sons), its funding structure, the market sector in which it operates, and its business strategy; and otherwise be prepared within the time and in the manner specified by the Bank in the direction; and be approved by the licensed insurer’s governing body 10 within the time specified by the Bank in the direction.
The Bank may, in the direction, require the recovery plan to specify a final date (being a date that is satisfactory to the Bank) by which all of the actions referred to in subsection (2)(b) must have been taken and the outcomes in subsection 15 (2)(b)(i), (ii), or (iii) achieved.

The Bank may, in the direction, require the licensed insurer to obtain assistance in the preparation of the recovery plan from a person specified by the Bank.
(3) (4) (5) A direction given under this section must state the grounds on 20 which it is given.

137 Recovery plan must be provided to Bank for approval (1) The licensed insurer must, within the time specified by the Bank, provide a copy of the recovery plan to the Bank.

The Bank must, after receiving the copy, inform the licensed 25 insurer whether the Bank is satisfied that the plan meets the requirements in section 136(2) and (3).
If the Bank is not satisfied that the recovery plan meets the requirements in section 136(2) or (3),— (a) the Bank may require the licensed insurer to amend the 30 plan and to resubmit the plan to the Bank for approval within any reasonable time that the Bank may specify; and the licensed insurer must comply with those require- ments.
(b) 35 (2) (3) 114 Insurance (Prudential Supervision) Bill Part 4 cl 141 138 Licensed insurer must comply with recovery plan The licensed insurer must, after the recovery plan has been approved by the Bank, take all practicable steps to comply with the plan.

139 Amendments to recovery plan (1) A licensed insurer may amend its recovery plan only with the 5 (2) Bank’s approval.
If, at any time, the Bank is no longer satisfied that the recovery plan meets the requirements in section 136(2) or (3),— (a) the Bank may require the licensed insurer to amend the 10 plan in the manner specified by the Bank and to resub- mit the plan to the Bank for approval within any reason- able time that the Bank may specify; and the licensed insurer must comply with those require- ments.
15 (b) 140 Offence to fail to comply with recovery plan requirements A licensed insurer commits an offence if it fails to comply with any of sections 136 to 139 and is liable, on summary conviction, to a fine not exceeding $500,000.
Subpart 2—Directions to licensed insurers and associated persons 141 Bank may give directions to licensed insurer (1) The Bank may give a licensed insurer a direction, in writing, if it has reasonable grounds to believe that 1 or more of the following apply: (a) 20 25 the insurer has failed, is failing, or is likely to fail to maintain a solvency margin: the business of the insurer has not been, or is not being, conducted in a prudent manner: the insurer, or a director or relevant officer of the insurer, 30 has failed, is failing, or is likely to fail to comply with any direction, condition, or other requirement imposed by or under this Act or the regulations: the governance structure of the insurer has changed, since its licence was issued, in a manner that signifi- 35 (b) (c) (d) 115 Part 4 cl 142 Insurance (Prudential Supervision) Bill (e) (f) cantly reduces the extent to which it is appropriate (hav- ing regard to the matters specified in section 18(1)(h)): the insurer is an overseas insurer and an overseas super- visor has taken, or is taking, regulatory action against the insurer (whether or not that action has been com- 5 pleted): the insurer is an overseas insurer and the law, require- ments, or supervision referred to in section 18(1)(i) has changed, since its licence was issued, in a man- ner that significantly reduces the extent to which that 10 law, those requirements, or that supervision is appropri- ate (having regard to the matters specified in that para- graph).
(1A) The Bank must, before giving a direction under subsection (2) (1) to a licensed insurer, consider whether, in the circum- 15 stances, it would be more appropriate to give a direction to the insurer to prepare a recovery plan under subpart 1.
In this section, regulatory action means— (a) action to cancel or suspend the licence, registration, or other authorisation of the insurer to act as an insurer 20 (or action equivalent to cancelling or suspending such a licence, registration, or authorisation); or a direction to the insurer to the effect of 1 or more of the following: (i) (ii) (iii) to take specified action to improve its solvency: to cease to enter into new contracts of insurance: to carry on its business, or any part of its business, in accordance with the direction: to cease to carry on its business, or any part of its business, in accordance with the direction; or (iv) 25 30 (b) (c) (d) removing or replacing any directors or relevant officers of the insurer (whether by means of a direction or other- wise); or civil or criminal proceedings against the insurer.
142 Scope of directions to licensed insurer (1) A direction given under section 141 may require a licensed 35 insurer to— 116 Insurance (Prudential Supervision) Bill Part 4 cl 143 (a) (b) (c) (d) (e) (f) (g) consult with the Bank, at the times and in the manner specified by the Bank, about the circumstances of the insurer and the actions or proposed actions of the insurer in respect of resolving any difficulties facing the insurer: cease entering into any new contracts of insurance (sub- 5 ject to subsection (2)): carry on its business, or any part of its business, in ac- cordance with the direction: cease to carry on its business, or any part of its business, in accordance with the direction: take the action that is specified in the direction to ad- dress a failure, or potential failure, to comply with any direction, condition, or other requirement imposed by or under this Act or the regulations: ensure that any officer or employee of the insurer ceases 15 to take part in the management or conduct of its business except with the permission of the Bank and so far as that permission extends: take the action that is specified in the direction to ad- dress any circumstances of financial difficulties.
20 10 (2) A However, a direction must not require the licensed insurer to cease to enter into contracts of insurance by way of renewal of contracts of insurance that were originally entered into before the direction was given.
143 Bank may give directions to associated person 25 The Bank may give an associated person of a licensed insurer a written direction if it has reasonable grounds to believe that 1 or more of the following apply: (a) the associated person, or a director or the chief execu- tive officer of the associated person, has failed, is fail- 30 ing, or is likely to fail to comply with any direction or other requirement imposed by or under this Act or the regulations: the circumstances of the associated person are such as to be prejudicial to the solvency of the insurer or its ability 35 to comply with this Act or the regulations: (b) 117 Part 4 cl 144 Insurance (Prudential Supervision) Bill (c) the affairs of the associated person are being conducted in a manner prejudicial to the solvency of the insurer or its ability to comply with this Act or the regulations.
144 Scope of directions to associated person A direction given under section 143 may require an associ- 5 ated person to— (a) consult with the Bank, at the times and in the manner specified by the Bank, about the circumstances of the associated person and the actions or proposed actions of the associated person in respect of resolving any dif- 10 ficulties facing the associated person: take the action that is specified in the direction to ad- dress a failure, or potential failure, to comply with any direction or other requirement imposed by or under this Act or the regulations: ensure that any officer or employee of the associated person ceases to take part in the management or conduct of its business except with the permission of the Bank and so far as that permission extends: take the action that is specified in the direction to ad- 20 dress any circumstances of financial difficulties.
15 (b) (c) (d) 145 Miscellaneous matters relating to directions (1) A direction given under this subpart must state the grounds on (2) which it is given.

The Bank may— (a) (b) (c) amend or modify a direction; or replace a direction with another direction; or revoke a direction.

25 146 Offence to contravene directions (1) A licensed insurer, or an associated person of a licensed in- 30 surer, that fails to comply with a direction under this subpart commits an offence.
Every person commits an offence who, being an officer or em- ployee of a licensed insurer or of an associated person of a li- censed insurer, obstructs, hinders, or prevents the insurer or 35 (2) 118 Insurance (Prudential Supervision) Bill Part 4 cl 147 (3) associated person from giving effect to a direction under this subpart.
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 5 term not exceeding 3 months or to a fine not exceeding $200,000 (or both): in the case of a body corporate, to a fine not exceeding $500,000.
(b) 147 Power to remove, replace, or appoint directors, auditor, 10 (1) (2) (3) or actuary This section applies if the Bank has reasonable grounds to be- lieve that— (a) any of the circumstances referred to in section 141(1) or 143 exists; and it is necessary to— (i) (b) 15 remove or replace a director, an auditor, or an the appointed actuary of a licensed insurer or of an associated person of a licensed insurer; or appoint a person as a director, an auditor, or an 20 the appointed actuary of a licensed insurer or of an associated person of a licensed insurer.
(ii) If this section applies, the Bank may— (a) remove or replace a director, an auditor, or an the ap- pointed actuary of a licensed insurer or of an associated 25 person of a licensed insurer; or appoint a person as a director, an auditor, or an the ap- pointed actuary of a licensed insurer or of an associated person of a licensed insurer.
(b) The Bank must— (a) 30 exercise a power referred to in subsection (2) by giv- ing notice in writing to— (i) the director, auditor, or actuary concerned, or the person being appointed; and in the case of the removal, replacement, or ap- 35 pointment of a director, the Registrar of Compan- ies; and (ii) 119 Part 4 cl 148 Insurance (Prudential Supervision) Bill (b) give notice in writing of the exercise of that power to the licensed insurer or associated person.
(4) A notice given under subsection (3)(a)(ii) is sufficient com- pliance with section 159 of the Companies Act 1993 as long as, in the case of an appointment, the notice is accompanied 5 by the form of consent and certificate required under section 152 of that Act.

This section does not apply in respect of a director of an over- seas person.
This section has effect despite any enactment, rule of law, or 10 the terms of the constitution of a licensed insurer or an associ- ated person of a licensed insurer.

(5) (6) 148 Offence to disclose giving of direction or notice (1) Every person commits an offence who discloses that a direc- tion has been given under subpart 1 or this subpart or that a 15 notice has been given under section 147.
(2) Nothing in subsection (1) applies to the disclosure or pub- lication of the fact that a direction or notice has been given if the disclosure or publication is made— (a) to any director, relevant officer, or professional or finan- 20 cial adviser of the licensed insurer or associated person of a licensed insurer to which the direction or notice re- lates: (b) with the written consent of the Bank, for the purposes (c) of the sale or other disposition, or the possible sale or 25 other disposition, of the whole or any part of the cap- ital, or business undertaking, of the licensed insurer or associated person of a licensed insurer: by, or on behalf of, the Bank or with the written consent of the Bank,— (i) (ii) to the public or any class of the public; or to any person who has a proper interest in know- ing that the direction or notice has been given.
30 For the purposes of subsection (2)(b) and (c),— (a) the Bank’s consent must not be unreasonably withheld; 35 and (3) 120 Insurance (Prudential Supervision) Bill Part 4 cl 149 (b) in considering whether to give its consent, the Bank must take into account the time that has elapsed since the direction or notice was given.
(4) Nothing in subsection (1) applies to the disclosure or publi- (5) cation of the fact that a direction has been given requiring the 5 actions set out in section 142(1)(f) or 144(c) for the purpose of giving effect to that direction.
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 10 term not exceeding 3 months or to a fine not exceeding $200,000 (or both): in the case of a body corporate, to a fine not exceeding $500,000.
(b) Subpart 3—Liquidation 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 15 20 (2) 149 Bank may apply for liquidation of insurers (1) The Bank may, in the case of a licensed insurer that may be put into liquidation under or in accordance with the Companies Act 1993, apply to the High Court to appoint a liquidator for the insurer.
The High Court may, on an application under subsection (1), 25 appoint a liquidator for the licensed insurer if it is satisfied that— (a) the insurer is unable to pay its debts (and, for that pur- pose, section 287 of the Companies Act 1993 applies with all necessary modifications whether or not the in- 30 surer is a company); or the insurer is failing to maintain a solvency margin; or the insurer has persistently or seriously failed to com- ply with any direction, condition, or other requirement imposed by or under this Act or the regulations; or it is just and equitable that the insurer be put into liquid- ation.
35 (b) (c) (d) 121 Part 4 cl 150 Insurance (Prudential Supervision) Bill (3) The High Court may, on the application of the Bank, appoint a liquidator for a body corporate that may be put into liquid- ation under or in accordance with the Companies Act 1993 if it is satisfied that the body corporate is carrying on insurance business in New Zealand without holding a licence in breach 5 of section 14.

Subsection (3) does not limit subsections (1) and (2).
(4) (5) Nothing in this section limits or affects any other enactment that provides for the winding up, liquidation, or dissolution of any body corporate or any class of body corporate.

10 150 Bank may apply for High Court to reduce value of (1) (2) (3) contracts of insurance The High Court may, on the application of the Bank, reduce the value of 1 or more of a licensed insurer’s contracts of in- surance if it is satisfied that 1 or more of the grounds specified 15 in section 149(2)(a) to (d) apply.
The High Court may order a reduction under this section on the terms and subject to the conditions (if any) that it thinks fit.

The High Court may, for the purposes of this section, order the 20 Bank to arrange for an independent actuary to prepare a report on the matters that the court thinks fit.
151 Bank may apply for voluntary administration of licensed insurers The Bank may apply under section 239L of the Companies 25 Act 1993 for the appointment of an administrator for a licensed insurer that is a company.
Bank’s approval for voluntary liquidation or appointment of administrator by company 152 Bank’s approval for voluntary liquidation or appointment 30 of administrator by company (1) A liquidator may not be appointed under section 241(2)(a) or (b) of the Companies Act 1993 for a licensed insurer unless— a copy of the special resolution referred to in section (a) 241(2)(a) is given to the Bank or the Bank is notified 35 122 Insurance (Prudential Supervision) Bill Part 4 cl 153 of the occurrence of the event referred to in section 241(2)(b) (as the case may be); and the Bank has given its written approval to the appoint- ment.
(b) (2) An administrator may not be appointed under section 239I of 5 the Companies Act 1993 for a licensed insurer unless— (a) a copy of the resolution referred to in that section is given to the Bank; and the Bank has given its written approval to the appoint- ment.

(b) 10 (3) An appointment made in breach of subsection (1) or (2) is not valid.
(4) A request for the Bank to give its approval under this section must— (a) (b) be made in the manner that is specified by the Bank; and 15 be accompanied by the prescribed fee (if any).

(5) A person that makes a request must provide to the Bank the information that is required by the Bank to assist it in deter- mining whether to give its approval.
Bank’s participation in insolvency procedures and certain other proceedings 20 153 Bank may make certain applications in respect of (1) (2) voluntary administration or liquidation and appear and be heard in proceedings If any person other than the Bank makes an application to the 25 High Court to appoint a liquidator for a licensed insurer or otherwise for the winding up or dissolution of a licensed in- surer or for the appointment of an administrator for a licensed insurer, the Bank may appear and be heard in relation to the application.
If a licensed insurer is in voluntary administration, is subject to a deed of company arrangement, or is in liquidation under the Companies Act 1993,— (a) the Bank may make an application under any of sections 239R, 239AM, 239ACJ, 239ACL, 239ACX, 239ADB, 35 239ADD, 239ADO to 239ADQ, 239ADS to 239ADV, 239AER, 239AEU, 245A, 250, 271, 283(4), 284, and 30 123 Part 4 cl 154 Insurance (Prudential Supervision) Bill 286 of that Act in respect of the insurer (and those sec- tions apply, with all necessary modifications, as if the references to the persons who may make an application under those sections include a reference to the Bank); and the Bank may appear and be heard in relation to an ap- plication made by any other person under any of those sections in respect of the insurer.
5 (b) (3) If a person makes an application under section 239ADR of the Companies Act 1993 in respect of a licensed insurer, the Bank 10 may appear and be heard in relation to the application.
154 Bank’s participation in arrangements, amalgamations, (1) and compromises under Companies Act 1993 If a compromise under section 228(1) of the Companies Act 1993 has been proposed in respect of a licensed insurer, the 15 insurer must send to the Bank a copy of the notice, statement, and lists referred to in section 229(2) of that Act as soon as practicable after those documents are delivered for registration under that subsection.
(2) A licensed insurer that fails to comply with subsection (1) 20 commits an offence and is liable, on summary conviction, to a fine not exceeding $100,000.

If a person makes an application under section 232, 233, or 236 of the Companies Act 1993 in respect of a licensed insurer, the Bank may appear and be heard in relation to the application.
(3) 25 155 Bank must be sent copy of applications under Parts 14 to 16 of Companies Act 1993 If a person (other than the Bank) makes an application to the High Court under any provision of Parts 14 to 16 of the Com- panies Act 1993 in respect of a licensed insurer, each of the 30 following persons must take reasonable steps to ensure that a copy of the application (together with copies of any reports or other documents that are filed in the court in respect of the ap- plication) are sent to the Bank as soon as practicable: (a) the insurer (unless it is in voluntary administration or 35 liquidation or is subject to a deed of company arrange- ment): (1) 124 Insurance (Prudential Supervision) Bill Part 4 cl 157 (b) (c) if the insurer is in voluntary administration or liquid- ation or subject to a deed of company arrangement, the administrator, liquidator, or deed administrator (as the case may be): the Registrar of the High Court in which the application 5 is made.
(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 $100,000.
156 Bank must be sent copies of certain documents and may 10 (1) (2) (3) inspect certain accounts and records If a person is required to prepare a specified document in respect of a licensed insurer under any of sections 239AH, 239ACZ, 239ADY(a) and (c), 239AI, 239ACP(1)(a), 239ADZ, 239AEA, and 257(1)(a)(i) or (ii) of the Companies 15 Act 1993, the person must send a copy of the document to the Bank as soon as practicable after it has been prepared.
In subsection (1),— prepare, in respect of a specified document, includes to lodge, send, file, or make the document specified document means a report, an account, a deed, a no- tice, or a statement.

The Bank may inspect any accounts or records kept by a li- quidator of a licensed insurer under section 256(1)(a) of the Companies Act 1993.
20 25 (1) 157 Attendance of representative of Bank at certain meetings for insurer in voluntary administration, subject to deed of company arrangement, or in liquidation This section applies in respect of a licensed insurer that is— (a) (b) (c) The convenor of a specified meeting in respect of a licensed insurer must ensure that— in voluntary administration; or subject to a deed of company arrangement; or in liquidation under the Companies Act 1993.
(2) 30 125 Part 4 cl 158 Insurance (Prudential Supervision) Bill (a) (b) the Bank receives the notices and communications re- lating to the meeting that a person who is entitled to attend the meeting is entitled to receive; and a representative of the Bank— (i) (ii) may be heard at the meeting.
is permitted to attend the meeting; and (3) In this section,— convenor, in relation to a specified meeting, means an admin- istrator, a deed administrator, a liquidator, or any other person that convenes, calls, or summons the meeting specified meeting— (a) means a meeting convened, called, or summoned under any of the provisions of section 239T, subparts 6 to 8 of Part 15A, and sections 239ADF, 243, 244, 258(2)(b) and (d), 314, and 315 of the Companies Act 1993; and includes— (i) (b) a meeting of a creditors’ committee (within the meaning of section 239AR of the Companies Act 1993): a meeting called as a result of a requirement 20 under section 158.
(ii) 5 10 15 158 Bank may require meeting of creditors or shareholders to (1) appoint liquidation committee This section applies in respect of a licensed insurer that is in liquidation under the Companies Act 1993.
25 (2) At any time in the course of the liquidation, the Bank may, by notice in writing to the liquidator, require the liquidator to call a meeting of creditors or shareholders— (a) to vote on a proposal that a liquidation committee for the purposes of section 315 of the Companies Act 1993 30 be appointed to act with the liquidator; and if it is so decided, to choose the members of the com- mittee.
(b) The liquidator must comply with the requirement and section 314(4) to (6) of the Companies Act 1993 apply, with all ne- 35 cessary modifications, for the purposes of this section (except (3) 126 Insurance (Prudential Supervision) Bill Part 4 cl 161 that section 314(4) is not subject to subsections (2) and (3) of that section).
Special insolvency provisions for insurers 159 High Court may reduce value of contracts of insurance (1) If an application has been made to the High Court to appoint a 5 liquidator or an administrator for a licensed insurer, the court may, if it thinks fit, reduce the value of 1 or more of the in- surer’s contracts of insurance instead of appointing the liquid- ator or administrator.
The High Court may if it thinks fit, on the application of a 10 liquidator or an administrator of a licensed insurer, reduce the value of 1 or more of the insurer’s contracts of insurance.

The High Court may order a reduction under this section on the terms and subject to the conditions (if any) that it thinks fit.

15 (2) (3) (4) A liquidator or an administrator who makes an application under subsection (2) must provide a copy of the application to the Bank as soon as practicable after it is filed.
The Bank is entitled to attend and be heard in any proceedings under this section.

(5) 20 160 High Court may require actuarial report (1) The High Court may, for the purposes of section 159, order a licensed insurer, a liquidator, an administrator, or another person that is a party to the proceedings to arrange for an in- dependent actuary to prepare a report on the matters that the 25 court thinks fit, and to make any order in the matter as to costs and otherwise as it thinks fit.
The person that arranges for an independent actuary to prepare the report must ensure that a copy is provided to the Bank as soon as practicable after it is prepared.

30 (2) 161 Continuation of life policies if insurer in liquidation (1) This section applies in relation to the liquidation of a life in- surer under the Companies Act 1993.
The liquidator must carry on the life insurer’s business so far as it consists of continuing the insurer’s life policies with a view 35 (2) 127 Part 4 cl 162 Insurance (Prudential Supervision) Bill (3) (4) (5) to that part of the business being transferred as a going concern to a person who may lawfully continue those life policies.

Subsection (2) applies unless the High Court orders other- wise.
In continuing the business, the liquidator— (a) may agree to the variation of any life policies in exis- 5 tence when the liquidator is appointed; but (b) must not enter into any new life policies.
The High Court may, on the application of the Bank or a li- quidator, appoint an independent actuary to investigate the life 10 insurer’s business so far as it consists of continuing its life poli- cies and to report to the Bank and liquidator— (a) on the desirability or otherwise of that part of the in- surer’s business being continued; and on any reduction in the life policies effected by the in- 15 surer that may be necessary for successful continuation of that part of the insurer’s business.
(b) (6) Nothing in Schedule 6 of the Companies Act 1993 limits this section.

(1) 162 Liquidator or deed administrator may apply to High Court for approval of scheme of transfer of insurance business The liquidator or deed administrator of a licensed insurer may apply to the High Court for approval of a scheme under which all or part of the insurer’s insurance business is transferred to 25 another person (the transferee).
20 (2) An application under subsection (1) must contain, or be ac- companied by, a scheme for the proposed transfer that sets out— (a) the contracts of insurance in respect of which liability is 30 to be assumed by the transferee (including a description of each class of contract that is sufficient to identify it, and the amount of the liability in respect of each class); and the assets that are to be transferred to the transferee in 35 consideration for the assumption of that liability; and the net value of those assets; and (b) (c) 128 (3) Insurance (Prudential Supervision) Bill Part 4 cl 163 (d) (e) the terms of the agreement or deed under which the pro- posed transfer is to be carried out; and particulars of any other arrangements necessary to give effect to the scheme.
The following reports must be provided to the High Court in 5 respect of an application under subsection (1): (a) a report on the scheme prepared by the Bank that con- tains the matters required by the High Court and any other matters that the Bank thinks fit; and an independent actuary’s report on the scheme obtained 10 by the Bank that contains the matters required by the High Court and any other matters that the Bank thinks fit.
(b) (4) The licensed insurer is liable to pay to the Bank the costs in- curred by the Bank in obtaining the actuary’s report under sub- 15 section (3)(b) (and the amount payable is recoverable as a debt due to the Bank in any court of competent jurisdiction).
163 Right to attend and be heard (1) If an application is made under section 162, the liquidator or deed administrator must, as soon as practicable after it is filed, 20 serve notice of the application on each of the following: (a) (b) (c) the Bank: the transferee: the person appointed by the High Court to represent the policyholders of the licensed insurer or any class of 25 those policyholders: the person appointed by the High Court to represent the shareholders or members of the licensed insurer or any class of those shareholders or members: the person appointed by the High Court to represent the 30 creditors of the licensed insurer or any class of those creditors.
(d) (e) (2) The following persons are entitled to appear and be heard on the application: (a) each person to whom notice of the application has been 35 sent under subsection (1): 129 Part 4 cl 164 Insurance (Prudential Supervision) Bill (3) (b) with the leave of the High Court, any other person who appears to the court to have a sufficient interest in the application.
In respect of a proceeding or intended proceeding under sec- tion 162, the High Court may, on an application by the liquid- 5 ator, the deed administrator, or the Bank, or on its own initia- tive, appoint persons for the purposes of subsection (1)(c) to (e).
164 Approval of scheme (1) (2) The High Court may— (a) (b) approve the scheme without modification; or approve the scheme subject to the modifications that it thinks fit (subject to the agreement of the liquidator or deed administrator, the Bank, and the transferee); or refuse to approve the scheme.
(c) In deciding whether to approve a scheme (with or without modifications), the High Court must have regard to— (a) the interests of the policyholders, shareholders or mem- bers, and creditors of the licensed insurer who are af- fected by the scheme; and the reports referred to in section 162(3); and any other matter the court considers relevant.
(b) (c) 165 Effect of approval When a scheme is approved— (a) (b) it becomes binding on all persons; and it has effect in spite of anything in the constitution of any licensed insurer affected by the scheme; and the liquidator or deed administrator must send a copy of the scheme to the Bank.
(c) 10 15 20 25 166 Application by Bank for directions to liquidator, 30 administrator, or deed administrator The Bank may apply to the High Court for the court to give directions to the liquidator, administrator, or deed administra- tor of a licensed insurer relating to the performance or exercise of any of the liquidator’s, administrator’s, or deed administra- 35 tor’s functions or powers.
(1) 130 Insurance (Prudential Supervision) Bill Part 4 cl 167 (2) On an application under subsection (1), the High Court may give directions concerning the performance or exercise of any of the liquidator’s, administrator’s, or deed administrator’s functions or powers, and every person is bound by those di- rections.

The liquidator, administrator, or deed administrator is entitled to appear and be heard on the application.
(3) 5 (3) 167 Valuation of policies by liquidator or deed administrator The liquidator of a licensed insurer must determine the amount (1) of the liability of the insurer to each policyholder under each 10 contract of insurance entered into in New Zealand by the in- surer in the manner and on the basis that the liquidator decides.
(2) A deed administrator of a licensed insurer may determine the amount of the liability of the insurer to each policyholder under each contract of insurance entered into in New Zealand 15 by the insurer in the manner and on the basis that the deed administrator decides.
The liquidator or deed administrator (if the deed administrator acts under subsection (2)) must give to each policyholder no- tice in writing of the amount of the liability under the policy- 20 holder’s contract of insurance as determined under subsec- tion (1) or (2).
The amount of the liability of the licensed insurer, as deter- mined by the liquidator or deed administrator under subsec- tion (1) or (2), is binding upon each policyholder to whom 25 notice is given under subsection (3), unless, within 2 months after the date the notice was given, that person appeals to the High Court against the liquidator’s or deed administrator’s de- termination.
(4) (5) On an appeal to the High Court against the liquidator’s or deed 30 administrator’s determination, the High Court may confirm, reverse, or modify the determination appealed against and may make any other order that it thinks fit.
131 Part 4 cl 168 Insurance (Prudential Supervision) Bill Subpart 4—Statutory management Commencement of statutory management 168 Statutory management of licensed insurers and associated (1) (2) (3) persons The Governor-General may, by Order in Council, on the ad- 5 vice of the Minister given in accordance with a recommenda- tion of the Bank,— (a) declare that a licensed insurer is subject to statutory management; and declare that an associated person of a licensed insurer is 10 subject to statutory management; and appoint 1 or more persons as statutory manager or statu- tory managers of the licensed insurer or associated per- son for a specified period.
(b) (c) If an Order in Council is made under subsection (1),— (a) every subsidiary of a licensed insurer declared to be subject to statutory management, except any subsidiary declared to be a subsidiary to which the order does not apply, is subject to statutory management; and the appointment of a statutory manager for the specified 20 period in respect of the licensed insurer also applies to those subsidiaries.
(b) 15 If a licensed insurer acquires a subsidiary after it has been de- clared to be subject to statutory management under subsec- tion (1), the subsidiary is not subject to statutory management 25 unless a further Order in Council is made declaring the sub- sidiary to be subject to statutory management.
169 Statutory management of overseas persons If a licensed insurer or an associated person of a licensed in- surer that is declared to be subject to statutory management, or 30 a subsidiary of a licensed insurer that becomes subject to statu- tory management under section 168(2) or (3), is an overseas person, the provisions of this subpart apply to the property, rights, assets, and liabilities relating to its New Zealand busi- ness.
35 132 Insurance (Prudential Supervision) Bill Part 4 cl 171 170 Date and time of appointment (1) Every Order in Council made under section 168(1) must spe- cify the date on which, and the time at which, the Order in Council comes into force.

The date and time as specified must not be earlier than the date 5 on which, and the time at which, the Order in Council is made.
If a question arises as to whether, on the date on which a statu- tory manager was appointed, an act was done or a transaction was entered into or effected before or after the appointment, the act or transaction must, in the absence of proof to the con- 10 trary, be treated as having been done, entered into, or effected, as the case may be, after the appointment of the statutory man- ager.
171 Grounds on which licensed insurer may be declared to be (2) (3) (1) (b) subject to statutory management The Bank may make a recommendation under section 168 in respect of a licensed insurer only if it is satisfied on reasonable grounds that— (a) 15 1 or more of the circumstances specified in section 141(1)(a) to (f) apply and the failure of the insurer may 20 cause significant damage to the financial system or the economy of New Zealand (or both); or the insurer is, or may be, operating fraudulently or reck- lessly, and that it is desirable that the insurer be declared to be subject to statutory management for the purpose 25 of— (i) limiting or preventing the risk of further deterio- ration of the financial affairs of the insurer; or limiting or preventing the carrying out, or the effects, of any fraudulent act or activity; or enabling the affairs of the insurer to be dealt with in a more orderly or expeditious way.
(ii) (iii) 30 (2) However, the Bank must not make a recommendation under section 168 in respect of a licensed insurer unless it is satis- fied on reasonable grounds that the public interest, the finan- 35 cial system or economy of New Zealand, or any policyholders of the insurer cannot be adequately protected under the provi- 133 Part 4 cl 172 Insurance (Prudential Supervision) Bill sions of this Act other than this subpart or under the Compan- ies Act 1993.
172 Grounds on which associated person may be declared to (1) be subject to statutory management The Bank may make a recommendation under section 168 5 in respect of an associated person of a licensed insurer if it is satisfied on reasonable grounds that— (a) (b) (c) 1 or more of the circumstances specified in section 143(a) to (c) apply; or the business and affairs of the licensed insurer are so 10 closely connected with the associated person that a statutory manager would be unable to exercise effect- ively the powers conferred by this subpart in relation to the insurer unless the statutory manager is also ap- pointed as statutory manager of the associated person; 15 or the associated person is, or may be, operating fraudu- lently or recklessly in a manner prejudicial to the sol- vency of the insurer or its ability to comply with this Act or the regulations, and that it is desirable that the 20 person be declared to be subject to statutory manage- ment for the purpose of— (i) limiting or preventing the risk of further deterio- ration of the financial affairs of the person; or limiting or preventing the carrying out, or the 25 effects, of any fraudulent act or activity; or enabling the affairs of the person to be dealt with in a more orderly or expeditious way.
(ii) (iii) (2) However, the Bank must not make a recommendation under section 168 in respect of an associated person of a licensed 30 insurer unless it is satisfied on reasonable grounds that the pub- lic interest, the financial system or economy of New Zealand, or any policyholders of the person or of the insurer cannot be adequately protected under the provisions of this Act other than this subpart or under the Companies Act 1993.
If an associated person of a licensed insurer is also a licensed insurer, the Bank may make a recommendation under section 35 (3) 134 Insurance (Prudential Supervision) Bill Part 4 cl 174 168 in respect of the person on any of the grounds in subsec- tion (1) or section 171.

Section 171 does not limit subsection (3).


(4) 173 Bank must give notice of recommendation The Bank must, as soon as practicable after the making of an 5 Order in Council under section 168 declaring a licensed in- surer or an associated person of a licensed insurer to be subject to statutory management, give written notice to the insurer or associated person stating the grounds on which the Bank’s rec- ommendation was made.
10 174 Application of this subpart to joint statutory managers, (1) (2) associated persons, and subsidiaries If an Order in Council is made under section 168 appointing 2 or more persons as statutory managers of a licensed insurer, the order must state whether the powers conferred by this sub- 15 part must be exercised by those persons acting together or may be exercised individually.
For the purposes of this subpart, unless the context otherwise requires,— (a) references to a statutory manager, if 2 or more persons 20 are appointed as statutory managers, include references to those statutory managers: if an associated person of a licensed insurer is declared to be subject to statutory management, or a subsidiary of a licensed insurer becomes subject to statutory man- 25 agement under section 168(2) or (3),— (i) (b) (ii) references to a licensed insurer in this subpart must be read as including references to the asso- ciated person or subsidiary, as the case may be; and references to a corporation in the provisions of the Corporations (Investigation and Manage- ment) Act 1989 (as applied by section 178) must be read as including references to the asso- ciated person or subsidiary, as the case may be.
30 35 135 Part 4 cl 175 Insurance (Prudential Supervision) Bill 175 Continuation of statutory management of companies (1) (2) restored to New Zealand register This section applies to a licensed insurer, an associated person of a licensed insurer, or a subsidiary of a licensed insurer that has been removed from the New Zealand register under sec- 5 tion 317 of the Companies Act 1993 while subject to statutory management.
If a person to whom this section applies is restored to the New Zealand register under section 328 of the Companies Act 1993, the person continues to be subject to statutory management 10 from the date the person is so restored.
Exercise of powers 176 Considerations affecting exercise of powers by statutory (1) (2) (3) manager In exercising the powers conferred by this subpart, a statutory 15 manager of a licensed insurer must have regard to— (a) (b) the purposes of this Act; and the principles set out in section 4 that are relevant to the exercise of those powers; and the advice of the Bank.
20 (c) Every statutory manager must— (a) (b) consult with the Bank, to the extent required by the Bank, as to the exercise of those powers: provide the reports that the Bank may require as to the state of the affairs, business, and statutory management 25 of the licensed insurer to persons specified by the Bank (including, but not limited to, the Bank) in the form and with the frequency that the Bank may require.
The powers conferred by this subpart on a statutory manager of a life insurer are subject to the requirements of subpart 3 30 of Part 2 (which relates to statutory funds).

177 Statutory manager to comply with directions of Bank (1) Every statutory manager of a licensed insurer must comply with any directions given in writing by the Bank relating to the exercise of the powers of the statutory manager under this 35 subpart.
136 Insurance (Prudential Supervision) Bill Part 4 cl 178 (2) This section is subject to section 58 of the Corporations (In- vestigation and Management) Act 1989 (as applied by sec- tion 178).
Application of Corporations (Investigation and Management) Act 1989 5 178 Application of Corporations (Investigation and Management) Act 1989 The following provisions of the Corporations (Investigation and Management) Act 1989 apply for the purposes of this sub- part with all necessary modifications as if a person declared to 10 be subject to statutory management under this subpart were a corporation declared to be subject to statutory management under that Act: (a) (b) section 42 (which relates to a moratorium): section 43 (which contains a prohibition against the re- 15 moval of assets), except that a person who commits an offence under section 43(2) is liable on summary con- viction,— (i) in the case of an individual, to imprisonment for a term not exceeding 3 months or to a fine not 20 exceeding $200,000 (or both): in the case of a body corporate, to a fine not ex- ceeding $500,000: (ii) (c) (d) (e) (f) (g) (h) 25 section 44 (which relates to the statutory manager sus- pending payment of money owing): section 45 (which relates to management vesting in the statutory manager): section 46 (which relates to the powers of the statutory manager): section 47 (which empowers the statutory manager to 30 carry on the business of the person in statutory manage- ment): section 48 (which empowers the statutory manager to pay creditors and to compromise claims): section 49 (which relates to the termination of contracts 35 of agency or service): 137 Part 4 cl 179 Insurance (Prudential Supervision) Bill (i) (j) (k) (l) (m)
 (n) (o) (p) (q) (r) (s) (t) (u) (v) (w) 5 sections 50(1) and (2), 51, 53, and 72 (which relate to the power of the statutory manager to sell the business undertaking of the person in statutory management): section 52 (which relates to the liquidation of the person in statutory management): section 54 (which relates to a power to trace property improperly disposed of): section 55 (which relates to the application of certain provisions of the Companies Act 1993): section 57 (which relates to termination of
 the appoint- 10 ment of the statutory manager), except that section 57(3) and (4) also apply where the statutory manager’s period of appointment has expired: section 58 (which allows a statutory manager to apply to the High Court for directions): section 59 (which allows the High Court to confer ad- ditional powers on the statutory manager): section 60 (which relates to advisory committees): section 61 (which provides for a prior winding up, li- quidation, or receivership to cease): section 64 (which relates to certain persons not being entitled to be consulted about the exercise of powers): section 65 (which relates to the expenses of statutory management): section 66 (which relates to advances to statutory man- 25 agers and members of advisory committees): sections 67 and 68 (which relate to a duty to deliver books and property to the statutory manager and an of- fence to destroy, alter, or conceal records): section 69 (which relates to a duty to report offences): sections 71 and 71A (which relates to the application of other Acts).
30 20 15 179 Act does not limit application of Corporations (Investigation and Management) Act 1989 (1) Nothing in this Act limits the Corporations (Investigation and 35 Management) Act 1989.

In particular, a licensed insurer (or an associated person of a licensed insurer) may be declared to be subject to statutory (2) 138 Insurance (Prudential Supervision) Bill Part 4 cl 182 management, or subject to the exercise of any other powers, under that Act.
Power to obtain documents and information 180 Powers to obtain documents and information A statutory manager has, and may exercise, all of the powers 5 conferred on a liquidator of a company by sections 261 to 267 of the Companies Act 1993 in the same manner as if the statu- tory manager were the liquidator of a company in liquidation under that Act (and, for that purpose, section 373(3) of that Act applies with all necessary modifications).
10 Sales and dispositions 181 Sale requires Bank’s approval The statutory manager may not sell or otherwise dispose of the following unless the statutory manager has consulted with the Bank and the Bank, with the consent of the Minister, has 15 given approval in writing to the sale or other disposition and the terms and conditions of it: (a) the whole or any substantial part of the business under- taking of a licensed insurer under section 50(1) of the Corporations (Investigation and Management) Act 20 1989 (as applied by section 178): any of the shares of a body corporate formed and regis- tered under section 50(2)(a) of that Act (as applied by section 178): the whole or any substantial part of the business under- 25 taking of a body corporate formed and registered under section 50(2)(a) of that Act (as applied by section 178).
(b) (c) 182 Consents not required under other enactments The provisions of any enactment or agreement requiring any 30 consent, licence, permission, clearance, or other authority do not apply in respect of the following (being a sale or dispos- ition to which the Bank has, with the consent of the Minister, given its approval under section 181): 139 Part 4 cl 183 Insurance (Prudential Supervision) Bill (a) (b) the sale or other disposition of the whole or any part of the business undertaking of a licensed insurer under sec- tion 50(1) of the Corporations (Investigation and Man- agement) Act 1989 (as applied by section 178): the sale or other disposition under section 50(2)(e) of 5 that Act (as applied by section 178) of— (i) any of the shares of a body corporate formed and registered under section 50(2)(a) of that Act; or the whole or any part of the business undertaking of that body corporate.
(ii) 10 Body corporate may be formed to acquire branch of overseas person 183 Statutory manager may form body corporate to acquire (1) (2) (b) business of branch of overseas person If a licensed insurer that is an overseas person is declared to be 15 subject to statutory management, the statutory manager may— form and register a body corporate under the Companies (a) Act 1993 or any other Act: subscribe for or acquire, as trustee for the overseas per- son, all or any of the shares of the body corporate: allot or issue all or any of the shares in the body corpo- rate as fully or partly paid, as the case may be, up to the value of any property, rights, and assets vested in the body corporate under subsection (2) (after deducting the value of any liabilities so vested).
(c) 20 25 The Governor-General may, by Order in Council, on the ad- vice of the Minister given in accordance with a recommen- dation of the Bank, declare that the whole or any part of any property, rights, assets, and liabilities of the overseas insurer relating to its New Zealand business will vest in the body cor- 30 porate referred to in subsection (1)(a) on a date specified in the order (and the property, rights, assets, and liabilities vest in the body corporate on the date specified).
(3) Nothing in subsection (2) reduces, extinguishes, or affects any obligation or liability of an overseas person.

Every body corporate referred to in subsection (1)(a) is, for the purposes of this subpart, deemed to be a licensed insurer 35 (4) 140 Insurance (Prudential Supervision) Bill Part 4 cl 185 (5) subject to statutory management as if the body corporate had been declared to be subject to statutory management under this subpart.
The statutory manager in respect of the overseas person is the statutory manager of the body corporate referred to in sub- 5 section (1)(a) as if the statutory manager had been appointed under section 168, and the provisions of this subpart apply accordingly.
184 Vesting of property subject to security (1) An order may be made under section 183 vesting any prop- 10 erty, rights, and assets of an overseas person in a body corpo- rate formed and registered under that section despite the ex- istence, or the terms and conditions, of any security over the property, or over those rights or assets, in favour of any other person.
15 (2) Any property, rights, or assets that are declared to vest under an order made under section 183 in the body corporate, being property, rights, or assets subject to a security in favour of any other person, continue to be subject to the security.
20 185 Proof of vesting (1) No registrar is obliged solely by reason of section 183 to change the name of any overseas person referred to in that section to that of any body corporate formed and registered under that section in any books or registers or in any document.
The presentation to any registrar or other person of any instru- 25 ment, whether or not comprising an instrument of transfer, by the body corporate is, in the absence of evidence to the con- trary, sufficient proof that the property is vested in the body corporate if the instrument— (a) (2) (b) (c) is executed or purports to be executed by the body cor- 30 porate; and relates to any property held by the overseas person be- fore the date specified in an Order in Council made under section 183; and contains a statement that the property has become 35 vested in the body corporate by virtue of the provisions of that section.
141 Part 4 cl 186 Insurance (Prudential Supervision) Bill (3) In this section, registrar means the Registrar-General of Land, a Registrar of Deeds, or any other person charged under any enactment with the keeping of any books or registers.
186 Provisions applying if liabilities included in sale If all or any part of any liability of a body corporate formed 5 and registered under section 183(1), or all or any part of any liability relating to the New Zealand business of any overseas person, is included in a sale or other disposition referred to in section 50 of the Corporations (Investigation and Manage- ment) Act 1989 (as applied by section 178), nothing in sec- 10 tion 53(a) of that Act relieves any overseas person from any obligation in respect of that liability.
Obligations incurred by statutory manager 187 Obligations incurred by statutory manager (1) Any obligations incurred by a statutory manager of a licensed 15 insurer in the course of his or her duties as statutory manager are incurred by that statutory manager on behalf of the insurer, and the statutory manager does not incur personal liability for those obligations.
In the winding up or liquidation of a licensed insurer, an asso- 20 ciated person of a licensed insurer, or a subsidiary of a licensed insurer, all amounts required to satisfy obligations incurred by the statutory manager on behalf of the insurer, associated per- son, or subsidiary must be paid in priority to all other debts.
(2) Value of contracts of insurance 25 188 Statutory manager may value policies (1) The statutory manager of a licensed insurer may determine the amount of the liability of the insurer to each policyholder under each contract of insurance entered into in New Zealand by the insurer in the manner and on the basis that the statutory 30 manager decides.
The statutory manager must give to each policyholder notice in writing of the amount of the liability of the insurer under the policyholder’s contract of insurance as determined under subsection (1).

35 (2) 142 Insurance (Prudential Supervision) Bill Part 4 cl 190 (3) The amount of the liability of the licensed insurer, as de- termined by the statutory manager under subsection (1), is binding upon each policyholder to whom notice is given under subsection (2).
189 Value of contracts of insurance may be reduced by Order 5 (1) (2) (3) in Council This section applies to a licensed insurer that is in statutory management.

The Governor-General may, by Order in Council, on the ad- vice of the Minister given in accordance with a recommenda- 10 tion of the Bank, reduce the value of 1 or more of the licensed insurer’s contracts of insurance.
The Order in Council may provide for the reduction to be on the terms and subject to the conditions (if any) that are speci- fied in the order.
15 Auditor, actuary, and annual financial statements and records 190 Appointment of auditor and actuary (1) The statutory manager of a licensed insurer must appoint 1 or more persons (whether as individuals or as the members of any 20 firm or firms) to be the auditor of the insurer, being a person or persons who are qualified for appointment as an auditor of a company under the Companies Act 1993 and who have been approved by the Bank.
The statutory manager of a licensed insurer must appoint a per- 25 son to be the appointed actuary of the insurer, being a person who has been approved by the Bank.

Every appointment must be for a term not exceeding 2 years, but any person appointed as auditor or actuary continues in office until a successor comes into office.

30 (2) (3) (4) A person appointed as auditor or actuary is eligible for reap- (5) (6) pointment.
The auditor or actuary must be paid the fees that are fixed by the statutory manager with the approval of the Bank.
Every auditor and every actuary has a right of access at all 35 times to the books and papers of the licensed insurer, and is 143 Part 4 cl 191 Insurance (Prudential Supervision) Bill entitled to require from its officers and employees the infor- mation and explanations that the auditor or actuary thinks ne- cessary for the performance of the auditor’s or actuary’s duties (as the case may be).
191 Prior auditor or actuary ceases to hold office A person holding office as auditor or appointed actuary of a licensed insurer at the time that it is declared to be subject to statutory management ceases to hold that office but may be appointed under section 190 as auditor or appointed actuary (as the case may be) of the insurer.
5 10 192 Removal of auditor or actuary (1) An auditor or actuary appointed under section 190 may be removed from office by the Minister in accordance with a rec- ommendation of the Bank, by notice in writing to the auditor or actuary, for inability to perform the functions of the office, 15 bankruptcy, neglect of duty, or misconduct, proved to the sat- isfaction of the Minister.

The notice must be published in the Gazette as soon as prac- ticable.
(2) 193 Annual financial statements (1) 20 The statutory manager of a licensed insurer must, within 3 months after the end of each financial year or a later date that is approved by the Bank, prepare the following statements show- ing the financial position of the licensed insurer and its sub- sidiaries at the end of that year and the results of their trading 25 for that year: (a) a statement of financial position and statement of finan- cial performance of the insurer; and a consolidated statement of financial position and con- solidated statement of financial performance of the in- 30 surer and its subsidiaries.
(b) The financial statements must be— (a) (b) signed by the statutory manager; and audited and reported on by the auditor.

(2) 144 Insurance (Prudential Supervision) Bill Part 4 cl 195 (2) (3) 194 Annual report by statutory manager (1) 5 The statutory manager of a licensed insurer must, after the end of each financial year, prepare a report on the conduct of the management and the affairs of the licensed insurer and its subsidiaries.
The report, together with the financial statements and the audi- tor’s report on them, must be submitted to the Minister and the Bank within 7 days after the completion of the auditor’s report.
The report, financial statements, and the auditor’s report on them must within 14 days after submission to the Minister be 10 filed,— (a) in the case of a licensed insurer that is a company, with the Registrar of Companies: in the case of any other body corporate, with the per- son exercising functions corresponding with those of 15 the Registrar of Companies.
(b) Termination of statutory management 195 Termination of statutory management by Order in (1) Council The Governor-General may, by Order in Council, on the ad- 20 vice of the Minister given in accordance with a recommen- dation of the Bank, declare that 1 or more of the following persons who are subject to statutory management cease to be subject to statutory management: a licensed insurer: (a) an associated person of a licensed insurer: (b) a subsidiary of a licensed insurer.
(c) 25 (2) A person who is likely to be affected by the making of an Order in Council under section 168 may request the Bank to make a recommendation under subsection (1).
If an Order in Council is made under subsection (1) declaring that a licensed insurer ceases to be subject to statutory manage- ment,— (a) (3) every subsidiary of the insurer, except any subsidiary specified in the order, ceases to be subject to statutory 35 management on the same date as that specified as the date on which, and at the same time as that specified 30 145 Part 4 cl 196 Insurance (Prudential Supervision) Bill (b) as the time at which, the insurer ceases to be subject to statutory management: the appointment of any person appointed as a statutory manager of every such subsidiary terminates on the date and at the time referred to in paragraph (a).
5 196 Termination of statutory management on liquidation A licensed insurer, an associated person of a licensed insurer, or a subsidiary of a licensed insurer ceases to be subject to statutory management if the insurer, associated person, or sub- sidiary, as the case may be, is put into liquidation on the appli- 10 cation of the statutory manager.
197 Time of termination (1) If an Order in Council is made under section 195 or a licensed insurer, an associated person, or a subsidiary is put into liquid- ation,— (a) the person ceases to be subject to statutory management at the specified time; and the appointment of any statutory manager appointed in respect of the person terminates at the specified time.
(b) (2) In this section, specified time means,— (a) if an Order in Council is made under section 195, the date and time specified in the order: if a liquidator is appointed, the date and time of the liquidator’s appointment.
(b) Part 5 Miscellaneous provisions Provisions relating to Lloyd’s 15 20 25 198 Lloyd’s underwriters must not carry on insurance business in New Zealand unless Lloyd’s holds licence (1) A Lloyd’s underwriter must not carry on business in New 30 Zealand that involves entering into contracts of insurance as an insurer with New Zealand policyholders unless Lloyd’s holds a licence issued under section 200A or 202.
(2) A Lloyd’s underwriter who fails to comply with subsection (1) commits an offence and is liable, on summary conviction, 35 146 Insurance (Prudential Supervision) Bill Part 5 cl 200 to imprisonment for a term not exceeding 3 months or to a fine not exceeding $200,000 (or both).

199 Lloyd’s may apply for licence on behalf of underwriting (1) (2) (3) (4) members Lloyd’s may apply for a licence in respect of the insurance 5 business carried on by Lloyd’s underwriters.
Lloyd’s application 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).

10 Lloyd’s must provide to the Bank the information that is re- quired by the Bank to assist it in determining the application.

Lloyd’s commits an offence if it provides false or misleading information to the Bank for the purposes of the application and is liable, on summary conviction, to a fine not exceeding 15 $1,000,000.
200 Lloyd’s fit and proper policy and risk management (1) (2) programme Lloyd’s must provide the following to the Bank with its appli- cation: (a) a copy of a written policy that complies with subsec- tion (2) (the Lloyd’s fit and proper policy); and a copy of a risk management programme that complies with subsection (3) (the Lloyd’s risk management programme).

a copy of a risk management programme that is relevant to the Lloyd’s market (the Lloyd’s risk management programme).
(b) (b) 20 25 The Lloyd’s fit and proper policy must— (a) govern the requirements and other criteria that a person 30 must have or satisfy in order to be, and continue to be, a Lloyd’s underwriter, being a policy for the purpose of ensuring that only fit and proper persons are, and continue to be, Lloyd’s underwriters; and 147 Part 5 cl 200A Insurance (Prudential Supervision) Bill (3) (4) (b) comply with section 32(2) and (4) (which apply with any necessary modifications) the prescribed require- ments.
be approved by the FSA.

(c) The Lloyd’s risk management programme must— (a) comply with section 73(2) (which applies with any necessary modifications); and be approved by the FSA.

(b) In this section and in sections 202 and 205, FSA means the Financial Services Authority established under the Financial 10 Services and Markets Act 2000 (UK) or any other overseas supervisor that acts in relation to insurers in the United King- dom.
5 200A Bank must issue temporary licence to Lloyd’s pending (1) (2) (b) consideration of its application The Bank must issue a temporary licence to Lloyd’s if— (a) Lloyd’s has, within 18 months after the commencement of this section, made, or purported to make, an applica- tion under section 199; and Lloyd’s has taken reasonable steps to— (i) provide a fit and proper policy that complies with section 200(2); and provide a risk management programme; and otherwise make the application under section 199 in the manner that is specified by the Bank.
The licence under subsection (1) remains in force until the earliest of the following: (a) (b) the issue of a licence under section 202: the date that the licence is cancelled under section 203A(4): the date that is 3 years after the commencement of this section.
(ii) (iii) (c) 15 20 25 30 201 Lloyd’s underwriters may carry on insurance business in New Zealand if Lloyd’s holds licence If Lloyd’s holds a licence issued under section 200A or 202, 35 every Lloyd’s underwriter may carry on insurance business re- (1) 148 Insurance (Prudential Supervision) Bill Part 5 cl 201 (2) ferred to in section 198 as if the member Lloyd’s underwriter held a licence.
Every Lloyd’s underwriter that carries on insurance business referred to in section 198 under a licence issued under sec- tion 200A or 202 must be treated as being a licensed insurer 5 for the purposes of the following provisions (and those pro- visions apply to the Lloyd’s underwriter as a licensed insurer with all necessary modifications): sections 42 to 72: (a) subpart 3 of Part 2 (if the Lloyd’s underwriter carries 10 (b) on business as a life insurer): Parts 3 and 4.
(c) (3) Despite subsection (2), in the case of a licence issued under section 200A, a Lloyd’s underwriter is required to comply with requirements imposed by or under the provisions referred 15 to in subsection (2) only to the extent that the conditions of the licence require the underwriter to comply.
(4) Despite subsection (2), in the case of a licence issued under section 202, the Bank may, by notice to Lloyd’s, exempt the Lloyd’s underwriters from a requirement imposed by or under 20 the provisions referred to in subsection (2) if the Bank, after taking into account the nature of the Lloyd’s market, is satis- fied that it would be unduly onerous or burdensome to impose the requirement on those underwriters.
Subsection (4) is subject to section 228 (which provides 25 for general provisions relating to exemptions).
Every Lloyd’s underwriter that carries on insurance business under subsection (1)— (a) must be treated as being an overseas insurer and a li- censed insurer for the purposes of this Act; and is subject to the conditions of the licence issued to Lloyd’s; and (b) (5) (2) 30 (c) must take all practicable steps to comply with the Lloyd’s fit and proper policy, the Lloyd’s risk manage- ment programme, and any directions in force under 35 section 205.
149 Part 5 cl 202 Insurance (Prudential Supervision) Bill (3) A Lloyd’s underwriter commits an offence and is liable, on summary conviction, to a fine not exceeding $500,000 if the Lloyd’s underwriter fails to comply with— (a) (b) a condition of the licence issued to Lloyd’s; or subsection (2)(c).
5 Issue of licence to Lloyd’s Lloyd’s is entitled to be issued with a licence if the Bank is satisfied that— (a) every relevant Lloyd’s underwriter has the ability to comply with subpart 2 of Part 2 and the regulations 10 (to the extent that those provisions will apply); and every relevant Lloyd’s underwriter has the ability to comply with the Lloyd’s fit and proper policy and the Lloyd’s risk management programme; and in the case of relevant Lloyd’s underwriters who carry 15 on, or propose to carry on, business as life insurers, those Lloyd’s underwriters have the ability to comply with subpart 3 of Part 2 and the regulations (to the extent that those provisions will apply); and every relevant Lloyd’s underwriter has the ability to 20 comply with the proposed conditions of licence (if any); and Lloyd’s has the ability to comply with section 203A; and the Lloyd’s fit and proper policy is satisfactory; and the Lloyd’s risk management programme is satisfactory (having regard to the requirements of section 73(2)); and the nature and extent of prudential supervision by the FSA that applies to Lloyd’s and the relevant Lloyd’s 30 underwriters is appropriate, having regard to whether it 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 every relevant Lloyd’s underwriter— 25 35 (b) (c) (d) (d) (e) (f) (g) (h) 202 (1) 150 Insurance (Prudential Supervision) Bill Part 5 cl 203A (i) (ii) registered under the Financial Service is Providers (Registration and Dispute Resolution) Act 2008; or complies with section 13(a) and (b) of that Act; and 5 (i) Lloyd’s and every relevant Lloyd’s underwriter com- plies comply with any other prescribed requirements.
10 The Bank must, after it has made a decision on the application by Lloyd’s for a licence, give written notice of the decision to Lloyd’s.

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.

The Bank must give notice of the issue of the licence on the Bank’s Internet site.
In this section, relevant Lloyd’s underwriter means a Lloyd’s underwriter that will carry on insurance business referred to in section 198 under the licence.

In this section and section 205, FSA means the Financial Services Authority that has functions conferred on it by or 20 under the Financial Services and Markets Act 2000 (UK) or any other overseas supervisor that acts in relation to insurers in the United Kingdom.
15 (2) (3) (4) (5) (6) 203 Conditions of Lloyd’s licence (1) Lloyd’s may be issued with a licence under section 200A or 25 202 unconditionally or subject to any conditions that the Bank thinks fit.

(1A) The conditions may impose obligations on Lloyd’s, any Lloyd’s underwriter that will carry on insurance business referred to in section 198 under the licence, or both.

Section 21 appliesSection 21(1) and (3) apply to the licence with any necessary modifications.
(2) 30 203A Obligations on Lloyd’s (1) If Lloyd’s holds a licence issued under section 200A, Lloyd’s must take all practicable steps to ensure that the following are 35 complied with: 151 Part 5 cl 204 Insurance (Prudential Supervision) Bill (2) (3) (4) (5) 5 the conditions of the licence: the directions given under section 205. the Lloyd’s fit and proper policy: the Lloyd’s risk management programme: the conditions of the licence: the directions given under section 205.
(a) (b) If Lloyd’s holds a licence issued under section 202, Lloyd’s must take all practicable steps to ensure that the following are complied with: (a) (b) (c) (d) Lloyd’s commits an offence and is liable, on summary con- 10 viction, to a fine not exceeding $500,000 if Lloyd’s fails to comply with subsection (1) or (2).
If the Bank is satisfied that Lloyd’s has persistently or seriously failed to comply with subsection (1) or (2) or section 206 or 207, the Bank may, by written notice to Lloyd’s, cancel its 15 licence.
The Bank may, for the purpose of facilitating a cancellation under subsection (4), direct a Lloyd’s underwriter to arrange, subject to the Bank’s approval, to assign the underwriter’s li- abilities under contracts of insurance with New Zealand pol- 20 icyholders to 1 or more licensed insurers (and for that purpose, sections 29(2) to (5), 30, and 31 apply with any necessary modifications).
204 Provisions that do not apply in respect of Lloyd’s or Lloyd’s underwriters Sections 14 to 41, 73 to 81, and 233 to 237 do not apply to Lloyd’s or Lloyd’s underwriters (except to the extent that any of those provisions are applied under this Part section 203A(5)).
25 205 Bank may direct that Lloyd’s underwriters must not issue 30 or renew contracts of insurance The Bank may give Lloyd’s a direction, in writing, under sub- section (2) if it has reasonable grounds to believe that 1 or more of the following apply: (a) as a result of an enactment of an Act of the United King- 35 dom, a substantial change is made in the constitution, (1) 152 Insurance (Prudential Supervision) Bill Part 5 cl 207 (b) (c) powers, rights, or obligations of Lloyd’s or of Lloyd’s underwriters: as a result of a making of a bylaw by Lloyd’s, the rights or obligations of Lloyd’s underwriters are substantially changed: there has been a substantial change in the nature, or extent, of the FSA’s supervision of Lloyd’s or of Lloyd’s underwriters.
5 (2) A direction may do either or both of the following: (a) (b) direct that Lloyd’s underwriters must not enter into con- 10 tracts of insurance, or undertake liability under con- tracts of insurance, with New Zealand policyholders: direct that Lloyd’s underwriters must not renew con- tracts of insurance with New Zealand policyholders.
206 Agent of Lloyd’s and address for service (1) Lloyd’s must at all times during which it holds a licence— (a) be represented for the purposes of this Act by an in- dividual resident in New Zealand who is appointed by Lloyd’s as the agent of Lloyd’s for the purposes of this Act; and have an address in New Zealand for service for the pur- poses of this Act.

(b) 15 20 (2) Lloyd’s must notify the Bank of the matters referred to in sub- section (1) and of any changes to those matters.
(3) Anything done in his or her representative capacity by a person 25 appointed by Lloyd’s as, or to act as, its agent in accordance with this section is taken, for the purposes of this Act, to have been done by Lloyd’s.
207 Lloyd’s to give notice of enactments and bylaws If an Act of the United Kingdom is enacted relating specific- 30 ally to Lloyd’s, or a bylaw is made under the Acts of the United Kingdom known as the Lloyd’s Acts 1871–1982 or under any later Act of the United Kingdom relating to Lloyd’s, Lloyd’s must, within the period of 21 days after the enactment of the Act or the making of the bylaw, give written notice of that mat- 35 ter to the Bank if there are reasonable grounds to believe that 153 Part 5 cl 208 Insurance (Prudential Supervision) Bill the matter will have a material effect on either or both of the following: (a) the insurance business carried on by any Lloyd’s under- writer in New Zealand: any New Zealand policyholder under a contract of in- 5 surance entered into by a Lloyd’s underwriter.
(b) 208 Act does not authorise Lloyd’s underwriter to carry on any business underwriter could not otherwise have carried on Nothing in this Act authorises the carrying on by a Lloyd’s 10 underwriter of any business that the underwriter would not have been authorised to carry on if this Act had not been en- acted.
Access to information by overseas supervisor 209 Access to information by overseas supervisor (1) For the purpose of the exercise by an overseas supervisor of its supervisory functions, the Bank may authorise an overseas supervisor to do either or both of the following: (a) conduct an inspection of any licensed insurer that is an overseas person: require any licensed insurer that is an overseas person to supply to the overseas supervisor any information, data, or forecasts relating to that person.
(b) 15 20 (2) The information, data, or forecasts that an overseas supervisor may be authorised to obtain may include, without limitation, 25 information about the affairs of a particular customer or client of the licensed insurer.

The Bank may grant an authorisation only if it is satisfied that sufficient provision exists to protect the confidentiality of the information, data, or forecasts obtained or required by the 30 overseas supervisor.
(4) An authorisation may be— (3) (a) (b) granted for the period or periods that the Bank thinks fit; and varied, revoked, or amended by the Bank.

35 154 Insurance (Prudential Supervision) Bill Part 5 cl 211 (5) (6) The Bank must give notice in writing to a licensed insurer if the Bank— (a) (b) This section has effect despite anything to the contrary in any 5 other enactment or rule of law.

grants an authorisation in relation to that person; or varies, revokes, or amends that authorisation.
210 Duties of person on receipt of notice under section 209 (1) A licensed insurer that is an overseas person must, on receipt of a notice from the Bank under section 209, comply with that notice by, as the case may be,— (a) permitting the overseas supervisor to conduct an inspec- tion of that person; or supplying the overseas supervisor with the required in- formation, data, or forecasts within the time, and at the place, specified in the notice.
(b) (2) A licensed insurer that is an overseas person commits an offence if the person fails to comply in any respect with any requirements notified by the Bank under section 209 and is liable, on summary conviction, to a fine not exceeding $500,000.
Offences 211 False declarations and representations (1) Every person commits an offence who, for any purpose relat- ing to this Act, either on the person’s own behalf or on behalf of any other person,— (a) 10 15 20 25 either orally or in writing, makes any declaration or rep- resentation to the Bank or an investigator that, to the person’s knowledge, is false or misleading in any ma- terial particular; or supplies to the Bank or an investigator any document 30 knowing it to contain any declaration or representation of that kind; or supplies to the Bank or an investigator a document knowing that it is not genuine.
(b) (c) (2) Every person who commits an offence under this section is 35 liable on summary conviction,— 155 Part 5 cl 212 Insurance (Prudential Supervision) Bill (a) (b) in the case of an individual, to a fine not exceeding $200,000: in the case of a body corporate, to a fine not exceeding $500,000.

(3) This section does not apply in the case of section 16(4) or 5 199(4).
212 Liability of directors If a body corporate is convicted of an offence under this Act, every director of the body corporate is guilty of an the offence if it is proved— (a) that the act that constituted the offence took place with his or her authority, permission, or consent; or that he or she— (i) (b) knew, or could reasonably be expected to have known, that the offence was to be or was being 15 committed; and failed to take reasonable steps to prevent or stop it.
(ii) 10 213 Defence for offences against this Act (1) In any prosecution of a person for an offence under this Act, 20 it is a defence if the person proves that— (a) the failure to comply with this Act was due to the act or omission of another person, or some other cause beyond the person’s control; and the person took reasonable precautions and exercised 25 due diligence to avoid the failure.
(b) (2) For the purposes of subsection (1)(a), another person does not include a director, employee, or agent of the person charged with the offence.
(3) A person is not, without the leave of the court, entitled as part 30 of a defence provided by this section to rely on any of the cir- cumstances specified in subsection (1)(a) unless the person has, not later than 7 working days before the date on which the hearing of the proceedings commences, served on the prosecu- tion a notice in writing identifying the act, omission, or cause 35 relied on by the person.
156 Insurance (Prudential Supervision) Bill Part 5 cl 215 Prohibition against falsely holding out New Zealand connection 214 Prohibition against falsely holding out New Zealand connection (1) No New Zealand person or overseas company may hold out 5 (2) outside New Zealand that the person carries on insurance busi- ness in New Zealand, or that the person is regulated by New Zealand law in respect of insurance business carried on in New Zealand by the person, if the person does not carry on insur- ance business in New Zealand.
In this section and section 215,— New Zealand person means any of the following: (a) a body corporate or an association of persons incorpor- ated or formed in New Zealand: a person who is ordinarily resident in New Zealand (b) overseas company means an overseas company that is re- quired to be registered or deemed to be registered under the Companies Act 1993.
10 15 (3) A New Zealand person or an overseas company that fails to comply with this section commits an offence and is liable, on 20 summary conviction,— (a) in the case of an individual, to a fine not exceeding $50,000: in the case of a body corporate, to a fine not exceeding $200,000.
(b) 215 Certain New Zealand persons and overseas companies (1) prohibited from using certain words in name If a New Zealand person or an overseas company does not carry on insurance business in New Zealand, the person can- not— (a) be formed, incorporated, or registered in New Zealand using a name or title that includes a restricted word; or change the person’s name or title in New Zealand to a name or title that includes a restricted word; or carry on any activity directly or indirectly in New 35 Zealand (whether through an agent or otherwise) using a name or title that includes a restricted word.
(b) (c) 25 30 157 Part 5 cl 216 Insurance (Prudential Supervision) Bill (2) The restricted words are the following in any language: (a) (b) (c) (d) (e) insurance: assurance: underwriter: reinsurance: any term whose meaning is the same as, or similar to, that of any term in paragraphs (a) to (d).
(3) A New Zealand person or an overseas company that fails to comply with this section commits an offence and is liable, on summary conviction,— (a) in the case of an individual, to a fine not exceeding $50,000: in the case of a body corporate, to a fine not exceeding $200,000.
(b) 216 Prohibition does not apply in certain cases (1) Sections 214 and 215 do not apply to a person if, in connec- tion with any insurance business carried on in New Zealand, that person does any 1 or more of the following: (a) assists in issuing or administering contracts of insur- ance, or in collecting premiums: acts as an insurance loss adjuster or assessor: arranges, negotiates, solicits, or promotes contracts of insurance or the renewals of contracts of insurance or both (for example, a broker or other insurance inter- mediary).
(b) (c) Sections 214 and 215 do not apply to industry associations.

In this section, industry association means a non-profit asso- ciation of members who work in the insurance industry and that performs 1 or more of the following functions: (a) representing members’ views to non-members, includ- 30 ing the Government: providing dispute resolution: providing education and training for members: providing social events for members: establishing rules or codes of conduct.
(b) (c) (d) (e) The Bank may, by notice in writing to a person, exempt the person from section 215 if the Bank is satisfied that the per- son— 35 (2) (3) (4) 158 Insurance (Prudential Supervision) Bill Part 5 cl 217 (a) (b) will not be carrying on insurance business in New Zealand; and has a legitimate reason to use the particular word in the person’s name.

(5) Subsection (4) is subject to section 228 (which provides 5 for general provisions relating to exemptions).
Restriction on insurer’s constitution 217 (1) (1) (2) (3) 15 10 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 If a licensed insurer is a subsidiary, the constitution of the in- surer must not include any provision that permits a director of the insurer to act in a manner that he or she believes is in the best interests of the insurer’s holding entity even though it may not be in the best interests of the insurer.
If a licensed insurer is a subsidiary, a provision in the consti- tution of the insurer is of no effect to the extent that it purports to permit a director of the insurer, when exercising powers or performing duties as a director, to act in a manner that he or she believes is in the best interests of the insurer’s holding entity 20 even though it may not be in the best interests of the insurer.

Subsection (1) applies despite section 131(2) of the Com- panies Act 1993.
In this section, constitution, in relation to a licensed insurer, means,— (a) in the case of a company within the meaning of the Companies Act 1993, the constitution of the company; and in any other case, the documents or instruments consti- tuting or defining the constitution of the insurer.

(b) 30 25 (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 $100,000.

This section does not apply to an overseas insurer.
(4) 159 Part 5 cl 218 Insurance (Prudential Supervision) Bill Ban ordered by District Court 218 Power to ban certain persons from participating in insurance business (1) A District Court may, on the application of the Bank, make an order in respect of a person under subsection (2) if the 5 District Court considers that the person— (a) has, in connection with an insurance business, engaged in an act, omission, or course of conduct that constitutes serious wrongdoing and that the person is not a fit and proper person to participate in insurance business in 1 10 or more of the ways described in subsection (2); or as a director of a licensed insurer, has persistently or ser- iously failed to comply with this Act or the regulations; or is a director of a licensed insurer, being an insurer that 15 has persistently or seriously failed to comply with any direction, condition, or other requirement imposed by or under this Act or the regulations, and the person has persistently failed to take reasonable steps to prevent or stop that failure; or is prohibited from participating in an insurance busi- ness in 1 or more of the ways specified in subsection (2)(a) to (g) under an order made, or a notice given, under a law of a country, State, or territory outside New Zealand.
20 25 (b) (c) (d) The order is an order banning a person from being or doing 1 or more of the following: (a) (b) being a director of an insurer: being concerned or taking part in the management of an insurer: being a shareholder of an insurer: being an employee or other agent of an insurer: acting under a contract for services with an insurer: being an insurance intermediary: otherwise participating in an insurance business in any 35 other way (whether paid or unpaid).
(c) (d) (e) (f) (g) 30 Every application to a District Court under this section must be made by an originating application.

(2) (3) 160 Insurance (Prudential Supervision) Bill Part 5 cl 219 (4) A ban under this section has effect from the date specified in the order even though an appeal may have been lodged under section 220.
(5) An order may be— (a) made even though the person concerned may be crim- 5 (b) (c) inally liable for the matters on the grounds of which the order is to be made; and permanent or for a specified time; and subject to the terms and conditions that the District Court thinks fit; and cancelled or varied at any time by the District Court.

(d) The District Court may make any order in the matter as to costs and otherwise as it thinks fit.
10 (6) (7) As soon as practicable after an order is made, the Registrar of the District Court must send a copy of the order to the Bank.
15 219 Notice of hearing (1) (b) If an application is made for an order under section 218, the Registrar of the District Court must— (a) fix the time and place for the hearing of the application; and as soon as practicable, give notice of the application and of the time and place of the hearing to— (i) (ii) (iii) the Bank; and the respondent; and any other person who appears to the Registrar of 25 the District Court to have a sufficient connection with the proceedings.
20 (2) On the hearing of the application,— (a) (b) (c) the Bank must appear and call to the attention of the District Court any matters that seem to the Bank to be 30 relevant, and may give evidence or call witnesses; and the respondent may appear and give evidence or call witnesses; and any person referred to in subsection (1)(b)(iii) may also appear and be heard.
35 161 Part 5 cl 220 Insurance (Prudential Supervision) Bill 220 Appeals to High Court (1) Any person who has a right to appear and be heard in any proceedings under section 218 may appeal to the High Court if a District Court— (a) has made or refused to make an order under that section; 5 or has otherwise finally determined or has dismissed the proceedings.

(2) An appeal is by way of rehearing.


(b) 10 (2) 221 Appeal to Court of Appeal on question of law (1) Any party to an appeal under section 220 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 15 the determination; and section 66 of the Judicature Act 1908 applies to any such appeal.
In determining whether to grant leave to appeal, the Court of Appeal must have regard to whether the question of law in- volved in the appeal is one that, by reason of its general or 20 public importance or for any other reason, ought to be submit- ted to the Court of Appeal for its decision.

The Court of Appeal, in granting leave, may impose the con- ditions that it thinks fit, whether as to costs or otherwise.
The decision of the Court of Appeal on any application for 25 leave to appeal, or on an appeal under this section, is final.

(3) (4) 222 Register of banned persons (1) The Bank must keep a register of persons banned under sec- tion 218 (the register).

The register may be— an electronic register; or (a) (b) kept in any other manner that the Bank thinks fit.
The Bank must take all reasonable steps to ensure that the in- formation contained in the register is available to members of the public at all reasonable times.

30 35 (2) (3) 162 Insurance (Prudential Supervision) Bill Part 5 cl 224 223 Search of register (1) A person may search the register in accordance with this Act (2) or the regulations.
The register may be searched only by reference to the follow- ing criteria: (a) 5 (b) in the case of an individual,— (i) (ii) (iii) (iv) the name, or former name, of the person: the residential or business address of the person: the person’s date of birth: any combination of the criteria in subpara- 10 graphs (i) to (iii): in the case of a body corporate,— (i) (ii) the name, or former name, of the body corporate: the address of the body corporate’s registered of- fice: the address of any place of business of the body corporate: any combination of the criteria in subpara- graphs (i) to (iii).
(iii) (iv) 15 (3) A search of the register may be carried out only by the follow- 20 ing persons for the following purposes: (a) an individual, or a person with the consent of the in- dividual, for the purpose of searching for information about that individual: a person for the purpose of determining whether or not 25 a person is banned under section 218 (and, if so, the nature and extent of the ban).
(b) (4) A search of the register for personal information that has not been carried out in accordance with this section constitutes an action that is an interference with the privacy of an individual 30 under section 66 of the Privacy Act 1993.
224 Offence for banned person to participate in insurance business in breach of order A person commits an offence if the person fails to comply with an order under section 218 and is liable, on summary 35 conviction,— 163 Part 5 cl 225 Insurance (Prudential Supervision) Bill (a) (b) 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): in the case of a body corporate, to a fine not exceeding $1,000,000.
5 Notice and service 225 Notice and service of documents (1) Unless this Act provides otherwise, if a provision of this Act requires or authorises any notice or other document, or any notification, to be given or provided to a person, the notice, 10 document, or notification must be given in writing to the per- son— (a) (c) (b) by delivering it personally or by an agent (such as a courier) to the person; or by sending it by prepaid post addressed to the person at 15 the person’s usual or last known place of residence or business; or by sending it by fax or email to the person’s fax number or email address provided by the person for the purpose; or in any other manner a District Court Judge directs.
(d) In the absence of proof to the contrary, a notice, document, or notification sent to a person in accordance with— (a) subsection (1)(b) must be treated as having been given or provided to the person when it would have been de- 25 livered in the ordinary course of the post; and, in prov- ing the delivery, it is sufficient to prove that the letter was properly addressed and posted: subsection (1)(c) must be treated as having been given or provided to the person on the second working day 30 after the day on which it is sent.
(b) 20 If a person is absent from New Zealand, a notice, document, or notification given to the person’s agent in New Zealand in accordance with subsection (1) must be treated as having been given or provided to the person.

35 (2) (3) 164 Insurance (Prudential Supervision) Bill Part 5 cl 227 (4) If a person has died, the notice, document, or notification may be given, in accordance with subsection (1), to his or her personal representative.
Protection from liability and indemnity 226 Protection from liability This section applies to— (1) the Bank; and (a) every statutory manager of a licensed insurer or of an as- (b) sociated person or of a subsidiary of a licensed insurer; and every officer or employee of the Bank; and every investigator; and every director of the Bank.
(c) (d) (e) (2) No person to whom this section applies is liable for an act done 5 10 or omitted to be done in the performance or exercise in good 15 faith of the person’s functions, duties, or powers under this Act.
227 (1) (2) Indemnity The Crown indemnifies the persons listed in subsection (2) for any liability that arises from the exercise or purported ex- 20 ercise of, or omission to exercise, any power conferred by this Act unless it is shown that the exercise or purported exercise of, or omission to exercise, the power was in bad faith.
The persons are— (a) (b) the Bank; and every statutory manager of a licensed insurer or of an as- sociated person or of a subsidiary of a licensed insurer; and every officer or employee of the Bank; and every investigator; and every director of the Bank.

(c) (d) (e) 30 25 (3) Any money required for the purposes of this section must be paid out of a Crown Bank Account without further authority than this section.
The indemnity conferred by subsection (1) extends to legal 35 costs incurred in defending a proceeding.

(4) 165 Part 5 cl 228 Insurance (Prudential Supervision) Bill (5) Within 12 sitting days of the making of any payment under this section, the Minister must present to the House of Representa- tives a report that contains details of the circumstances giving rise to the liability of the Crown, the amount of the payment, the person to whom the payment was made, and any other rele- 5 vant matters.
General provisions relating to declarations and exemptions 228 General provisions relating to declarations and exemptions (1AA) This section applies to a declaration under section 8A (which relates to declarations that persons are not carrying on insurance business in New Zealand in certain circumstances).
This section also applies to an exemption granted under any of the following sections: (a) (1) 10 15 (c) (d) (b) (ca) section 36 (which relates to exemptions for an over- seas insurer from the requirement to provide fit and proper certificates): section 60 (which relates to exemptions for an over- seas insurer from compliance with solvency standards): 20 section 117 (which relates to exemptions for an over- seas insurer from compliance with statutory fund re- quirements): section 201(4) (which relates to exemptions for Lloyd’s underwriters): section 216(4) (which relates to exemptions from the prohibition against using certain words in a name).
The Bank may give a declaration or grant an exemption un- conditionally or subject to any conditions that the Bank thinks fit (after taking into account the purposes of this Act and the 30 principles set out in section 4 that are relevant).
The Bank must make a declaration or an exemption avail- able— (a) for inspection at all reasonable times, free of charge,— (i) (ii) at the head office of the Bank; and on the Bank’s Internet site; and 35 25 (2) (3) 166 Insurance (Prudential Supervision) Bill Part 5 cl 228A (b) for purchase at all reasonable times and at a reasonable price.

The Bank’s reasons for granting an exemption (including why an exemption is appropriate) must be notified with the exemp- tion.
The Bank may amend or revoke an exemption in the same way as an exemption may be granted.

The Bank’s reasons for giving a declaration or granting an ex- emption (including why it is appropriate) must be notified with the declaration or exemption.

The Bank may amend or revoke a declaration or exemption in the same way as it may be given or granted.

Lloyd’s may apply for an exemption on behalf of Lloyd’s underwriters.
(4) (5) (4) (5) (6) (6A) A declaration— 5 10 15 (a) is a regulation for the purposes of the Regulations (Dis- allowance) Act 1989 but is not a regulation for the pur- poses of the Acts and Regulations Publication Act 1989; and (b) must be presented to the House of Representatives in 20 accordance with section 4 of the Regulations (Disallow- ance) Act 1989.
(7) To avoid doubt, anAn exemption is not a regulation for the purposes of the Regulations (Disallowance) Act 1989 and the Acts and Regulations Publication Act 1989.
25 General provisions relating to fit and proper standards and solvency standards 228A Status of standards (1) The following are regulations for the purposes of the Regula- tions (Disallowance) Act 1989 but are not regulations for the 30 purposes of the Acts and Regulations Publication Act 1989: (a) (b) Fit and proper standards and solvency standards must be pre- sented to the House of Representatives in accordance with sec- 35 tion 4 of the Regulations (Disallowance) Act 1989. fit and proper standards: solvency standards.
(2) 167 Part 5 cl 228B Insurance (Prudential Supervision) Bill 228B Public notice of standards (1) (2) (3) (4) The Bank must give notice of the issue of a fit and proper standard or solvency standard in the Gazette.

The notice in the Gazette must state— (a) (b) (c) the name of the standard; and a brief description of the nature of the standard; and where copies of the standard are available for inspection and purchase.

The notice in the Gazette need not contain the text of the stand- ard.
The Bank must make a fit and proper standard or solvency standard available to the public by making copies of it avail- able— (a) at the head office of the Bank; and on the Bank’s Internet site; and for inspection at all reasonable times, free of charge,— (i) (ii) for purchase at all reasonable times and at a reasonable price.
(b) 5 10 15 228C Consultation (1) The Bank must not issue a fit and proper standard or solvency 20 standard unless— (a) the Bank has consulted the persons or representatives of the persons that the Bank considers will be substantially affected by the issue of the standard; and those persons have had a reasonable opportunity to 25 comment to the Bank; and the Bank has considered those comments.

(2) A failure to comply with subsection (1) does not affect the (b) (c) validity of the standard.
(3) Any action taken by or on behalf of the Bank before the com- 30 mencement of this section in consulting persons or represen- tatives of persons on proposed fit and proper standards or sol- vency standards must be treated as having been taken by the Bank under, and for the purposes of, this section.
228D Bank may amend, revoke, or replace standard (1) The Bank may, by a notice signed by the Governor,— 35 168 Insurance (Prudential Supervision) Bill Part 5 cl 229 (a) (b) amend or revoke a fit and proper standard or solvency standard: revoke and replace a fit and proper standard or solvency standard.

(2) Sections 228A to 228C apply, with all necessary modifica- 5 tions, for the purposes of subsection (1).
(3) However, the Bank is not required to comply with section 228C in respect of an amendment to a fit and proper standard or solvency standard if, in its opinion, the amendment corrects a minor error or is otherwise of a minor nature.
10 Regulations 229 Regulations (1) The Governor-General may, by Order in Council, on the ad- vice of the Minister given in accordance with a recommenda- tion of the Bank, make regulations for all or any of the follow- 15 ing purposes: (a) (b) (c) (ca) (d) (e) (ea) declaring a class or classes of transactions or matters to be transactions or matters that are not by way of insur- ance for the purposes of this Act: declaring a public entity to be an entity to which sec- 20 tion 8(2)(d) applies: prescribing additional requirements for a person to be entitled to be issued with a licence: prescribing countries, states, or territories as jurisdic- tions for the purposes of sections 18(4), 36(2A), and 25 117(2A): prescribing additional matters for the purposes of sec- tion 19(2)(g): prescribing conditions or matters that conditions may relate to for the purposes of section 20(2)(h) or 30 47(2)(d): prescribing for the purposes of sections 32(4) and 200(2) requirements that fit and proper policies must comply with, including requirements relating to— (i) processes to be undertaken in assessing whether 35 a person is fit and proper to be appointed to, and hold, a position; and 169 Part 5 cl 229 Insurance (Prudential Supervision) Bill (ii) (iii) actions to be taken where a person is assessed as not being fit and proper; and reassessments to ensure that a person who holds a position remains a fit and proper person: (f) (g) (h) (i) (ia) (ib) (j) (ja) (k) prescribing the manner in which annual gross premium 5 income is
 determined and the amount of that income for the purposes of section 61(2)(a): prescribing— (ia) the circumstances and manner in which a fi- nancial strength rating must contain, or be 10 accompanied by, a reference to an overseas pol- icyholder preference for the purposes of section 61A: the circumstances in which disclosure of an over- seas policyholder preference under section 72 15 must be made (including prescribing to whom and when the disclosure must be made): the manner in which the disclosure under sub-
 paragraph (i) must be made: (i) (ii) prescribing types of risk for the purposes of section 20 73: prescribing auditing and registration requirements in re- spect of interim financial statements referred to in sec- tion 81(3): declaring a class or classes of contracts not to be life 25 policies for the purposes of section 84: prescribing matters for the purposes of section 88: prescribing the manner in which amounts are ascer- tained or calculated, notices are given, applications are made, or records are kept for the purposes of sections 30 88, 88A, 93, 97, 99, and 109: prescribing matters relating to the transfer of assets, and the crediting of amounts, to a statutory fund on its estab- lishment for the purposes of sections 88A and 91(ab): prescribing arrangements for the purposes of section 35 93: (ka) declaring classes of transactions for the purposes of section 96: 170 Insurance (Prudential Supervision) Bill Part 5 cl 229 (kb) prescribing restrictions and requirements for the pur- (l) (m) poses of section 97: prohibiting investments, or the retention of investments, for the purposes of section 98(2)(d) and prescribing a percentage for the purposes of section 98(3): prescribing matters for the purposes of sections 110 to 113, including prescribing— (i) 5 (ii) (iii) (iv) (v) (vi) how the amount of an operating profit or operat- ing loss is to be determined; and requirements relating to how the operating profit 10 or operating loss must be allocated; and
 requirements relating to the amount or proportion of profits (or certain parts of profits) that must be treated as, or added to, policyholders’ retained profits of a fund or shareholders’ or members’ re- 15 tained profits of fund (including providing for the amount or proportion to be determined or calcu- lated in a specified manner); and requirements relating to the amount or proportion of losses (or certain parts of losses) that must or 20 may be taken into account in reduction of policy- holders’ retained profits
 of a fund or sharehold- ers’ or members’ retained profits of a fund (in- cluding providing for the amount or proportion to be determined or calculated in a specified man- 25 ner); and how the amount of policyholders’ retained profits of a fund, shareholders’ or members’ retained profits of fund, or shareholders’ or members’ capital is determined or calculated; and requirements relating to the distribution of re- tained profits of a fund and shareholders’ or members’ capital in relation to a fund (including rules relating to ways in which distributions must or may be made, to whom, and restrictions on 35 distributions): 30 (n) prescribing forms for the purposes of this Act, and pre- scribing— 171 Part 5 cl 229 Insurance (Prudential Supervision) Bill (o) (p) (i) the inclusion in, or attachment to, forms of spe- cified information or documents: (ii) forms to be signed by specified persons: prescribing fees payable in respect of any matter under this Act or the manner in which fees may be calculated: 5 prescribing procedures, requirements, and other matters for the register kept under section 222, including mat- ters relating to the operation of that register, access to that register, and the location of, and hours of access to, that register: 10 (pa) prescribing transitional or savings provisions relating to the coming into force of subpart 3 of Part 2 (in addition to any other transitional provisions in this Act): providing for any other matters contemplated by this Act, necessary for its administration, or necessary for 15 giving it full effect.
(q) (2) Regulations made under this section or any other provision of this Act may prescribe different matters in respect of different classes of persons.

(2A) Regulations made under subsection (1)(pa) may provide 20 that, subject to the conditions that are specified in the regula- tions, during a specified transitional period,— (a) specified provisions of this Act (including definitions) do not apply: specified provisions repealed or amended or revoked by 25 this Act continue to apply.
(b) (2B) All regulations made under subsection (1)(pa) that are still in force on the day that is 3 years after the commencement of this section expire on the close of that day.

The Bank may refuse to perform a function or exercise a power 30 until a prescribed fee is paid.
(3) (4) Any Order in Council made under subsection (1) may au- thorise the Bank to refund or waive, in whole or in part and on any conditions as may be prescribed, payment of any fee or amount payable in relation to any person or class of persons.

(5) Any fee or amount payable to the Bank is recoverable by the Bank in any court of competent jurisdiction as a debt due to the Bank.
35 172 Insurance (Prudential Supervision) Bill Part 5 cl 230 229A Regulations may provide for exemptions (1) The Governor-General may, by Order in Council, on the ad- vice of the Minister given in accordance with a recommenda- tion of the Bank, make regulations for all or any of the follow- ing purposes: (a) 5 10 section 18(1)(d) or (ea); or section 61; or any provision of section 81; or subpart 3 of Part 2: exempting a class of specified persons that have an an- nual gross premium income (as determined in the man- ner specified in the regulations) that is less than a spe- cified amount from compliance with— (i) (ii) (iii) (iv) exempting a class of specified persons that have an an- nual gross premium income (as determined in the man- 15 ner specified in the regulations) that is less than a spe- cified amount from being an issuer for the purposes of the Financial Reporting Act 1993 by virtue of section 4(1)(da) of that Act: prescribing terms and conditions that an exemption 20 under paragraph (a) or (b) is subject to.
(b) (c) (2) (3) If the terms and conditions of an exemption under subsection (1)(a) or (b) that are prescribed under subsection (1)(c) are not complied with by a person, the exemption does not apply to the person.

In this section, specified person means— (a) a person that was carrying on insurance business in New Zealand immediately before the commencement of this section; or a friendly society (within the meaning of section 2 of 30 the Friendly Societies and Credit Unions Act 1982).
(b) 25 Repeals and consequential amendments 230 Amendments to Life Insurance Act 1908 (1) (2) This section amends the Life Insurance Act 1908.

Parts 1 and 1A, sections 78 to 79A, and Schedules 2 to 7, 20, 35 and 24 are repealed.

173 Part 5 cl 231 Insurance (Prudential Supervision) Bill 231 Repeals The following Acts are repealed: (a) (b) Insurance Companies’ Deposits Act 1953: Insurance Companies (Ratings and Inspections) Act 1994: 5 (c) Mutual Insurance Act 1955.
232 Amendments to other enactments (1) The Reserve Bank of New Zealand Act 1989 is amended in the manner indicated in Part 1 of Schedule 3.

The enactments specified in Parts 2 and 3 of Schedule 3 10 are amended in the manner indicated in that schedule.

(2) 232A Amendment to Financial Service Providers (Registration and Dispute Resolution) Act 2008 This section amends the Financial Service Providers (Regis- tration and Dispute Resolution) Act 2008.
Schedule 2 is amended by adding the following item: 15 (1) (2) Reserve Bank of New Zealand Licensed insurers (Pruden- Insurance tial Supervision) Act 2009 Transitional provisions 232B Bank may approve certain transfers (1) The Bank may, on the request of an insurer that is not a li- censed insurer, give its written approval to a transaction that 20 involves,— (a) in the case of an overseas insurer, the transfer of all or part of the insurer’s New Zealand insurance business to another insurer; or in the case of any other insurer, the transfer of all or part 25 of the insurer’s insurance business to another insurer.
(b) (2) If the Bank approves a transfer under subsection (1), sec- tion 51 (which provides for the effect of an assignment of liabilities for the purposes of the transfer) applies with all ne- cessary modifications as if the insurers were licensed insurers.
30 (3) A request for the Bank to give its approval under subsection (1) must be— 174 Insurance (Prudential Supervision) Bill Part 5 cl 233 (a) made within 18 months after the date on which this sec- tion comes into force; and (b) made in the manner that is specified by the Bank; and (c) accompanied by payment of the prescribed fee for the request (if any).
5 (5) (4) An insurer that makes a request and every other party to the proposed transfer must provide to the Bank the information that is required by the Bank to assist it in determining whether to give its approval.

Sections 44 to 46 apply with all necessary modifications in 10 relation to a request under subsection (1) as if the insurers were licensed insurers.
The Bank may, after considering a request made under sub- section (1), by notice in writing to the insurer,— (a) give its approval unconditionally or subject to any con- 15 ditions that the Bank thinks fit; or refuse to give its approval.

(b) If the Bank refuses to give its approval, it must give a notice to the insurer that contains a statement of its reasons.
(7) (6) 233 Bank must issue provisional licence pending consideration 20 (b) of application The Bank must issue a provisional licence to a person if the Bank is satisfied that— (a) the person was carrying on insurance business in New Zealand immediately before the commencement of this 25 section; and the person has, within 3 months after the commence- ment of this section, notified the Bank that it— (i) was carrying on insurance business in New Zealand immediately before the commencement 30 of this section; and intends to continue carrying on insurance busi- ness in New Zealand after the date that is 18 months after the commencement of this section; and (ii) 35 (c) the person has, within 18 months after the commence- ment of this section, made, or purported to make, an application under sections 16 and 17; and 175 Part 5 cl 234 Insurance (Prudential Supervision) Bill (d) the person has taken reasonable steps to— (i) provide a fit and proper policy that complies with section 32; and provide a risk management programme that com- plies with section 73; and otherwise make the application in the manner that is specified by the Bank.
5 (ii) (iii) 234 Bank may also issue provisional licence for insurer that is or will be in run-off The Bank may also issue a provisional licence to a person if 10 the Bank is satisfied that— (a) the person was carrying on insurance business in New Zealand immediately before the commencement of this section; and the person has given to the Bank a notice stating that it 15 intends to cease carrying on insurance business in New Zealand before the date that is 3 years after the com- mencement of this section.
(b) 235 Duration of provisional licence (1) A provisional licence remains in force until the earliest of the 20 following: (a) (b) (c) the issue of a licence under Part 2: the date that the provisional licence is cancelled under subsection (2): the date that is 3 years after the commencement of this 25 section.
(2) The Bank may cancel a provisional licence if— (a) the holder has asked the Bank, by written notice, to cancel the licence; or the Bank is satisfied that the holder has ceased to carry 30 on insurance business in New Zealand.
(b) 236 Provisional licence holder only required to comply with requirements to extent required by conditions (1) A provisional licence holder is required to comply with the specified requirements only to the extent that the conditions of 35 the licence require the holder to comply.
176 Insurance (Prudential Supervision) Bill Part 5 cl 237 (2) (3) 5 (b) In this section and section 237, specified requirements means the requirements imposed on a licensed insurer set out in the following: (a) sections 32 to 35 (which relate to fit and proper re- quirements): sections 53 to 57 and 72 to 81 (which relates to solvency standards, financial strength ratings, risk man- agement, and other matters of prudential regulation): (c) subpart 3 of Part 2 (which relates to statutory funds).
If an insurer becomes, or will become, an issuer under section 10 4(1)(da) of the Financial Reporting Act 1993 as a result of a provisional licence being issued to the insurer,— (a) the conditions of the licence may specify the account- ing periods or interim accounting periods in respect of which the insurer must be treated as being an issuer 15 under that Act (being periods that commence on or after the date that the licence is issued); and the Financial Reporting Act 1993 applies accordingly.
(b) 237 Conditions of licence (1) A provisional licence may be issued subject to— 20 (a) (b) (c) conditions that require the provisional licence holder to comply with the specified requirements in whole or in part and with any modifications, additions, or variations specified in the conditions; and conditions that require the provisional licence holder to 25 take specified actions to bring the holder into compli- ance with the specified requirements (including setting an appropriate timetable for taking those actions to en- sure that those actions are taken as soon as practicable); and conditions, in the case of a licence under section 234, that require 1 or more of the following: (i) the provisional licence holder to cease entering into all contracts of insurance or contracts of in- surance of a particular kind (whether by way of 35 renewal or otherwise): the provisional licence holder to arrange for the transfer of all or part of the holder’s insurance (ii) 30 177 Part 5 cl 238 Insurance (Prudential Supervision) Bill (iii) business to another person in the manner speci- fied in the condition: the provisional licence holder to otherwise take specified actions to ensure that the holder ceases to carry on insurance business in New Zealand 5 before the date that is 3 years after the com- mencement of this section (including setting an appropriate timetable for taking those actions); and (2) (3) a condition under section 236(3); and any other conditions that the Bank thinks fit.
(ca) (d) The Bank may, at any time after a provisional licence is issued, by notice in writing to the provisional licence holder,— (a) impose conditions of the provisional licence (whether or not the licence is already subject to conditions); or vary, remove, add to, or substitute any conditions of the provisional licence.
(b) 10 15 The Bank must not exercise a power referred to in subsection (2) unless— (a) the Bank gives the provisional licence holder not less 20 than 7 days’ notice in writing of the Bank’s intention to do so; and the notice contains, or is accompanied by, a statement of the Bank’s reasons; and the provisional licence holder has a reasonable oppor- 25 tunity to make submissions to the Bank; and the Bank has regard to those submissions.
(b) (c) (d) 238 Public Trust must return deposits (1) Public Trust must return to a depositor a deposit made with Public Trust under the Insurance Companies’ Deposits Act 30 1953, the Life Insurance Act 1908, or the Mutual Insurance Act 1955 within 30 days of after the earliest of the following: the date that Public Trust receives a notice from the (a) Bank under subsection (2): in the case of a non-licensed depositor, the date that is 35 18 months after the commencement of this section: the date that is 3 years after the commencement of this section.
(b) (c) 178 Insurance (Prudential Supervision) Bill Part 5 cl 239 5 (2) (3) The Bank must give a notice for the purposes of subsection (1)(a) in respect of a depositor if the depositor has been issued with a licence under Part 2 or section 202.
If, before a deposit is returned under this section, the depositor is put into liquidation in New Zealand,— (a) (b) subsection (1) does not apply; and the deposit must be applied and otherwise dealt with in accordance with the Insurance Companies’ Deposits Act 1953 or the Life Insurance Act 1908 (as the case may be) as if this Act had not been enacted.
(4) Until a deposit is returned under this section or is otherwise withdrawn, the Insurance Companies’ Deposits Act 1953 or the Life Insurance Act 1908 (as the case may be) continues to apply to the deposit as if this Act had not been enacted.
Every return of securities made for the purposes of this sec- 15 tion must be made as follows (unless the depositor otherwise directs in a written notice given to Public Trust): (a) (5) 10 20 (b) in the case of securities that are payable to bearer, by the delivery of the securities by Public Trust to the de- positor: in the case of securities that are not payable to bearer, by the transfer of the securities by Public Trust to the depositor.
In this section,— depositor means a person who has made any deposit with Pub- 25 lic Trust under the Insurance Companies’ Deposits Act 1953, the Life Insurance Act 1908, or the Mutual Insurance Act 1955 non-licensed depositor means a depositor that, on the date that is 18 months after the commencement of this section, does not hold any licence issued under this Act (whether a provi- 30 sional licence or a licence issued under Part 2 or section 200A or 202).
(6) 239 Deposit may be withdrawn in accordance with Insurance Companies’ Deposits Act 1953 or Life Insurance Act 1908 A deposit may be withdrawn in accordance with section 3A, 35 8, 9, or 19 of the Insurance Companies’ Deposits Act 1953 179 Part 5 cl 239 Insurance (Prudential Supervision) Bill or section 6, 11, or 12 of the Life Insurance Act 1908 (which continue to apply despite the repeal of those enactments).
180 Insurance (Prudential Supervision) Bill Schedule 1 Schedule 1 General provisions relating to incorporation by reference Material incorporated by reference into solvency standards 1 s 58 (1) Material may be incorporated by reference into a solvency standard— (a) (b) with any modifications, additions, or variations speci- in whole or in part; and fied in the solvency standard.
(2) Material incorporated by reference— (a) (b) is the material as it exists at the time the solvency stand- ard is issued; and has legal effect as part of the solvency standard for all purposes, except as provided in clauses 7 and 8.

Proof of material incorporated by reference 2 (1) A copy of any material incorporated by reference in a solvency standard must be— (a) certified by the Governor as a correct copy of the ma- terial; and retained by the Bank.
(b) The production in proceedings of a certified copy of the ma- terial is, in the absence of evidence to the contrary, sufficient evidence of the incorporation of the material into the solvency standard.
Access to material incorporated by reference The Bank— (a) must make copies of all material incorporated by ref- erence in a solvency standard available for inspection during normal working hours at the head office of the 30 Bank; and (b) must make copies of the material available for purchase at a reasonable price from the head office of the Bank; and 181 (2) 3 (1) 5 10 15 20 Schedule 1 Insurance (Prudential Supervision) Bill (c) may make copies of the material available in any other way that the Governor considers appropriate in the cir- cumstances (such as on an Internet site); and (d) must give notice in the Gazette of how the material is available for inspection and purchase.
(2) Subclause (1) applies to material when it is first incorporated into a solvency standard, and to any subsequent amendment or replacement of material that is incorporated into the standard.

(3) A failure to comply with this clause does not invalidate a sol- vency standard.
Effect of amendments to, or replacements of, material incorporated by reference An amendment to, or replacement of, material incorporated by reference in a solvency standard has legal effect as part of the standard only if— (a) the amendment or replacement material is made by the person or organisation that made the original material; and the amendment or replacement material is of the same general character as the original material; and a subsequent solvency standard states that the particular amendment or replacement material has legal effect as part of the standard.
(b) (c) Effect of expiry of material incorporated by reference Material incorporated by reference in a solvency standard that 25 expires, is revoked, or ceases to have effect, ceases to have legal effect as part of the standard only if a subsequent sol- vency standard states that the material ceases to have that legal effect.
Consultation before material incorporated by reference This clause applies if— (a) the Bank proposes to incorporate material by reference into any solvency standard; or the Bank proposes to issue a solvency standard adopting amended or replacement material.
(b) 30 35 4 5 6 (1) 182 (2) Insurance (Prudential Supervision) Bill Schedule 1 If any of the things referred to in subclause (1) are proposed, the Bank— (a) must make copies of the material (which in this sub- clause includes any amended or replacement material) proposed to be incorporated by reference available for 5 inspection during normal working hours at the head of- fice of the Bank; and (b) must make copies of the material available for purchase at a reasonable price from the head office of the Bank; and (c) may make copies of the material available in any other way that the Governor considers appropriate in the cir- cumstances (such as on an Internet site); and (d) must give notice in the Gazette of how copies of the ma- 10 terial may be inspected and purchased, and how people 15 may make comments on the proposal; and (e) must allow a reasonable opportunity for people to com- (f) ment on the proposal; and must consider any comments made within the time al- lowed.
20 (3) A failure to comply with this clause does not invalidate a sol- vency standard.

7 8 Acts and Regulations Publication Act 1989 not applicable The Acts and Regulations Publication Act 1989 does not apply to material incorporated by reference in a solvency standard, 25 or to any amendment to, or replacement of, the material.
Application of Regulations (Disallowance) Act 1989 to material incorporated by reference (1) Nothing in section 4 of the Regulations (Disallowance) Act 1989 requires material that is incorporated by reference in a 30 solvency standard to be laid before the House of Representa- tives.
The Regulations (Disallowance) Act 1989, apart from the modification to the application of section 4 of that Act made (2) 183 Schedule 1 Insurance (Prudential Supervision) Bill by subclause (1), applies to a solvency standard that incorp- orates material by reference.
184 Insurance (Prudential Supervision) Bill Schedule 2 Schedule 2 General provisions relating to search powers Search warrants s 130 1 Interpretation In this schedule, unless the context otherwise requires,— applicant means an investigator evidential material, in relation to an investigation by an in- vestigator, means evidence or any other item, tangible or in- tangible, of relevance to the investigation issuing officer means a Judge of the High Court or a District Court Judge thing includes an intangible thing (for example, an email ad- dress or access information to an Internet data storage facility).
5 10 Application for search warrant 2 (1) An application for a search warrant must contain, in reasonable 15 (e) (d) detail, the following particulars: the name of the applicant: (a) the provision authorising the making of the application: (b) the grounds on which the application is made (including 20 (c) the reasons why the legal requirements for issuing the warrant are believed by the applicant to be satisfied): the address or other description of the place proposed to be entered and searched: a description of the item or items or other evidential 25 material believed to be in or on or part of the place that is or are sought by the applicant: the period for which the warrant is sought: if the applicant wants to be able to execute the warrant on more than 1 occasion, the grounds on which execu- 30 tion on more than 1 occasion is believed to be necessary.
The issuing officer may require the applicant to supply further information concerning the grounds on which the search war- rant is sought.

The applicant must disclose in the application— (f) (g) 35 (2) (3) 185 Schedule 2 Insurance (Prudential Supervision) Bill (a) (4) details of any other application for a search warrant that the applicant knows to have been made within the pre- vious 3 months in respect of the place proposed to be searched; and the result of that application or those applications.
(b) The applicant must, before making an application for a search warrant, make reasonable inquiries within the Bank, for the purpose of complying with subclause (3).

The issuing officer may authorise the search warrant to be exe- cuted on more than 1 occasion during the period in which the 10 warrant is in force if he or she is satisfied that this is required for the purposes for which the warrant is being issued.
(6) An application for a search warrant must contain or be accom- panied by a statement by the applicant confirming the truth and accuracy of the contents of the application.

(5) 15 5 Mode of application for search warrant 3 (1) An application for a search warrant— (2) (a) must be in writing, unless subclause (3) applies; and (b) may be transmitted to the issuing officer electronically.
The applicant must appear in person before, or communicate 20 orally with, the issuing officer, unless subclause (4) applies.
(3) An issuing officer may allow an application for a search war- rant to be made orally (for example, by telephone call) or by personal appearance and excuse the applicant from putting all or any part of the application (including any required material) 25 in writing if— (a) the issuing officer is satisfied that the delay that would be caused by requiring an applicant to put all or any part of the application (including any required material) in writing would compromise the effectiveness of the 30 search; and the question of the issuing officer is satisfied that whether the warrant should be issued can properly be determined on the basis of an oral communication or a personal appearance (together with the material 35 described in paragraph (c)); and (b) 186 Insurance (Prudential Supervision) Bill Schedule 2 (c) the information required by clause 2(1) to (3) is sup- plied (whether orally, or partly orally and partly in writ- ing) to the issuing officer.
(4) An issuing officer may allow an application for a search war- rant to be made without either an appearance in person or an 5 oral communication with the issuing officer if— the issuing officer is satisfied that the question of (a) whether the search warrant should be issued can properly be determined on the basis of any written communication by the applicant (including the material 10 described in paragraph (b)); and the information required by clause 2(1) to (3) has been supplied to the issuing officer; and the issuing officer is satisfied that there is no need to ask any questions of, or seek any further information from, 15 the applicant.
(b) (c) (5) An issuing officer who allows an application for a search war- rant to be made under subclause (3) must record the grounds for the application as soon as practicable.
20 Retention of documents 4 (1) A copy (whether in electronic form or otherwise) of every written application for a search warrant, or (in the case of an oral application) the record of the application made by the is- suing officer, must be retained under the control of the Regis- trar of the District Court at which, or under the control of the 25 Registrar of the District Court that is closest to the place at which, the application was made, until,— (a) in a case where a search warrant is issued, the comple- tion of any proceedings in respect of which the validity of the warrant may be in issue; and in any other case, the expiry of 2 years after the records were first retained under the control of the Registrar of a District Court.
30 (b) (2) An applicant to whom a search warrant is issued must retain (whether in electronic form or otherwise) the warrant, a copy 35 of the application (if made in written form), and all documents tendered by the applicant in support of the application, until,— 187 Schedule 2 Insurance (Prudential Supervision) Bill (a) (b) in the case of a warrant that is executed, the completion of any proceedings in respect of which the validity of the warrant may be in issue; and in any other case, the destruction or transfer of the warrant and other documents is required by the Public 5 Records Act 2005 or any other enactment or rule of law.
5 Restrictions on issue of search warrant An issuing officer must not issue a warrant to seize any thing held by a lawyer that is a communication of a kind to which 10 legal professional privilege normally applies unless the issuing officer is satisfied that the information provided by the appli- cant indicates that the thing was made, received, completed, or prepared— (a) (b) for a dishonest purpose; or for the purpose of planning or committing an offence.
15 6 (1) (2) Form and content of search warrant Every search warrant issued must be in the prescribed form.

Every search warrant issued must be directed to every person who has authority to execute the warrant.
20 (3) A search warrant may be— (a) (b) (c) including 25 executed by any or all of the persons to whom it is di- rected: subject to any conditions specified in the warrant that the issuing officer considers reasonable, (without limitation)— (i) any restriction on the time of execution that is reasonable: a condition that the occupier or person in charge of a place must provide reasonable assistance to 30 a person executing the warrant if, in the absence of such assistance, it would not be practical to execute the warrant without undue delay: executed only once, unless execution on more than 1 occasion has been authorised.
(ii) 35 Every search warrant must contain, in reasonable detail, the following particulars: (4) 188 (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Insurance (Prudential Supervision) Bill Schedule 2 the name of the issuing officer and the date of issue: the provisions authorising the issue of the warrant (in- cluding, where relevant, the suspected offence or of- fences): that the person executing the warrant may use any as- 5 sistance that is reasonable in the circumstances: that any person authorised to do so may execute the warrant: that the person executing the warrant may use any force that is reasonable in the circumstances to enter or break 10 open or access any area within the place being searched, or the thing found: the address or description of the place that may be searched: a description of what may be seized: the period during which the warrant may be executed, being— (i) a period specified by the issuing officer not ex- ceeding 14 days from the date of issue; or if the issuing officer is satisfied that a period of 20 longer than 14 days is necessary for execution, a period specified by the issuing officer not ex- ceeding 30 days from the date of issue: (ii) 15 25 any conditions specified by the issuing officer under subclause (3)(b): if the warrant may be executed on more than 1 occasion, the number of times that the warrant may be executed: if the warrant is intended to authorise the remote access and search of things such as Internet data storage facil- ities that are not situated at a physical location that can 30 be searched, the access information that identifies the thing to be searched remotely: an explanation of the availability of relevant privileges and an outline of how any of those privileges may be claimed.
35 (5) A person is not required, as a consequence of a condition im- posed under subclause (3)(b)(ii), to give any information tending to incriminate the person.
189 Schedule 2 Insurance (Prudential Supervision) Bill 7 8 Transmission of search warrant If it is not possible or practicable for the person charged with executing the warrant to have it in his or her possession at the time of execution, one of the following documents (which is deemed for all legal purposes to constitute the warrant) may 5 be executed: (a) a facsimile, or a print-out of an electronically generated copy, of a warrant issued by the issuing officer: a copy made by the person to whom the warrant is di- rected, at the direction of the issuing officer and en- 10 dorsed to that effect.
(b) When search warrant executed A search warrant is executed when the person executing the warrant and any person assisting in the execution of the war- rant— (a) (b) has seized all the items specified in the warrant; or leaves the place being searched and does not return within 4 hours.
When search warrant invalid 9 (1) A search warrant is invalid— (a) (b) if, having regard to the information contained in the application, the grounds or conditions for lawful issue of a warrant set out in section 130 were not satisfied at the time the search warrant was issued: if the warrant contains a defect, irregularity, omission, 25 or want of form that is likely to mislead anyone execut- ing or affected by the warrant as to its purpose or scope.
If a warrant is invalid under this section, section 204 of the Summary Proceedings Act 1957 does not apply to that war- rant.

30 Carrying out inspection and search powers Application For the purposes of this schedule, search power means— (a) every search warrant issued under this Act; and (2) 10 190 15 20 Insurance (Prudential Supervision) Bill Schedule 2 (b) every power conferred under this Act to enter and search (without warrant) any place.
11 Search powers Every search power authorises the person exercising it— (a) (b) (c) (d) (e) (f) (g) (h) 15 to enter and search the place that the person is author- 5 ised to enter and search, and any item or items found in that place, at any time that is reasonable in the circum- stances: to request any person to assist with the entry and search (including, without limitation, a member of a hapu or 10 an iwi if the place to be entered is of cultural or spiritual significance to that hapu or iwi): to use any force that is reasonable for the purposes of the entry and search and the seizure of any item authorised by the search power to be seized: to seize any thing authorised to be seized: to bring and use in or on the place searched any equip- ment, to use any equipment found on the place, and to extract any electricity from the place to operate the equipment that it is reasonable to use in the circum- 20 stances, for the purposes of carrying out the entry and search: to copy any document, or part of a document, that may lawfully be seized: to access and copy intangible material from computers 25 and other data storage devices located at or accessible from the place searched (including copying by means of previewing, cloning, or other forensic methods either before or after removal for examination): to use any reasonable measures to— (i) gain access to any computer or other data storage device that is at the place to be searched, or that can be accessed from a computer or other data storage device that is at that place; and create a forensic copy of any material in such a 35 computer or other data storage device: (ii) 30 (i) to take photographs, sound and video recordings, and drawings of the place searched, and of any thing found 191 Schedule 2 Insurance (Prudential Supervision) Bill in that place, if the person exercising the power has reasonable grounds to believe that the photographs or sound or video recordings or drawings may be relevant in any proceedings related to the entry and search.
Items of uncertain status may be seized If a person exercising a search power is uncertain whether any item found may lawfully be seized, and it is not reasonably practicable to determine whether that item can be seized at the place where the search takes place, the person exercising the search power may remove the item for the purpose of exam- 10 ination or analysis to determine whether it may be lawfully seized.
5 (c) enter the place to be searched: Powers of persons called to assist Every person called on to assist a person exercising a search power is subject to the control of the person with overall re- 15 sponsibility for exercising that power.
Every person called on to assist a person exercising a search power may— (a) (b) while under the direction of the person exercising the 20 power, use reasonable force in respect of any property for the purposes of carrying out the entry and search and any lawful seizure: search areas within the place that the person exercising the power has determined may lawfully be searched: seize any thing that may lawfully be seized: take photographs, sound and video recordings, and drawings of the place, and things found in the place, if the person exercising the power has determined that those things may be lawfully taken: bring into or onto the place and use any equipment, make use of any equipment found on the place, or ex- tract electricity from the place for the purposes of op- erating the equipment that the person exercising the power has determined may be lawfully used: access and copy intangible material from computers and other data storage devices located at or accessible from (d) (e) (g) 30 25 35 (f) 12 13 (1) (2) 192 Insurance (Prudential Supervision) Bill Schedule 2 (h) (i) the place searched (including copying by means of pre- viewing, cloning, or other forensic methods either be- fore or after removal for examination): copy any document, or part of a document, that the per- son exercising the power has determined may be law- 5 fully copied: use any reasonable measures to— (i) (ii) gain access to any computer or other data storage device that is at the place to be searched, or that can be accessed from a computer or other data 10 storage device that is at that place; and create a forensic copy of any material in such a computer or other storage device.
If a constable is assisting another person exercising the search power, the constable may, without any direction or supervi- 15 sion by the person he or she is assisting, exercise any power ordinarily exercisable by the constable.

The person exercising the search power must— (a) accompany any assistant on the first occasion when the assistant enters the place to be searched; and provide such other supervision of any assistant as is rea- sonable in the circumstances.
(b) 20 (3) (4) (5) Subclause (4) does not apply if the assistant is a constable.

14 15 (1) Limitation on exercise of powers The powers conferred by clauses 11 to 13 are subject to— 25 any conditions imposed under clause 6(3)(b) by an (a) issuing officer who issues a search warrant: clauses 22 to 26 (which relate to privileges).
(b) Securing place to be searched The person carrying out a search may, in a manner and for a 30 duration that is reasonable for the purposes of carrying out the search,— (a) secure the place searched, any area within that place, or any thing found within that place: exclude any person from the place searched, or from 35 any area within the place, or give any other reasonable direction to such a person, if the person carrying out the (b) 193 Schedule 2 Insurance (Prudential Supervision) Bill search has reasonable grounds to believe that the person will obstruct or hinder the exercise of the power.
(2) A person who exercises any power under subclause (1) must on the request of any person affected by the exercise of the power— (a) (b) identify himself or herself; and advise the person affected of the reason and authority for the exercise of the power.
5 Seizure of items in plain view 16 (1) A person who exercises a search power or who is lawfully 10 in any place as part of his or her duties may seize any item or items that he or she, or any person assisting him or her, finds in the course of carrying out the search or as a result of observations at that place, if the person has reasonable grounds to believe that he or she could have seized the item or items 15 under— (a) any search warrant that could have been obtained by him or her under this Act or any other enactment; or any other search power exercisable by him or her under this Act or any other enactment.
(b) (2) If a person seizes any item or items under subclause (1) in cir- cumstances where he or she is not already exercising a search power, the person may exercise any applicable power con- ferred by clause 11 in relation to the seizure of the item or items.
20 25 17 Duty of persons with knowledge of computer or computer network or other data storage devices to assist access (1) A person exercising a search power at any place may require a specified person to provide access information and other infor- mation or assistance that is reasonable and necessary to allow 30 the person exercising the search power to access data held in, or accessible from,— (a) (b) a computer that is at the place being searched: any other data storage device that is at the place being searched.
In this clause,— 35 (2) 194 Insurance (Prudential Supervision) Bill Schedule 2 access information includes access codes, passwords, and en- cryption keys, and any related information that enables access to a computer or other data storage device specified person is a person who— (a) is the owner or lessee of the computer or other data stor- 5 age device, or is in possession or control of the computer or other data storage device, an employee of any of the above, or any service provider who provides service to the above and holds access information; and has relevant knowledge of— (i) the computer or a computer network of which the computer or other data storage device forms a part; or 10 (b) (ii) measures applied to protect data held in, or ac- cessible from, the computer or other data storage 15 device.
(3) A specified person may not be required under subclause (1) (4) (5) to give any information tending to incriminate the person.
Subclause (3) does not prevent a person exercising a search power from requiring a specified person to provide informa- 20 tion that— (a) is reasonable and necessary to allow the person exercis- ing the search power to access data held in, or accessible from, a computer or other data storage device that— is at or in the place to be searched; and (i) contains or may contain information tending to (ii) incriminate the specified person; but 25 (b) does not itself tend to incriminate the specified person.
Subclause (3) does not prevent a person exercising a search power from requiring a specified person to provide assistance 30 that is reasonable and necessary to allow the person exercising the search power to access data held in, or accessible from, a computer or other data storage device that— (a) (b) is at or in the place concerned; and contains or may contain information tending to incrim- 35 inate the specified person.
(6) Subclauses (1), (4), and (5) are subject to clauses 22 to 26 (which relate to privileges).
195 Schedule 2 Insurance (Prudential Supervision) Bill 18 Identification and notice requirements for person exercising search power (1) A person exercising a search power must,— (a) (b) before initial entry into or onto the place to be searched,— (i) announce his or her intention to enter and search the place under a statutory power: identify himself or herself; and (ii) before or on initial entry into or onto the place to be searched,— (i) 5 10 give the occupier (if present) of the place a copy of the search warrant or advice about the enact- ment (the authority) that authorises him or her to conduct the entry and search; and produce to the occupier of the place evidence of 15 his or her identity (which may include details of a unique identifier instead of a name).
(ii) 20 (b) (iii) The person exercising the search is not required to comply with subclause (1)(a) if he or she has reasonable grounds to believe that— (a) no person is lawfully present in or on the place to be searched; or compliance with subclause (1)(a) would— endanger the safety of any person; or (i) prejudice the successful exercise of the entry and 25 (ii) search power; or prejudice ongoing investigations.
The person exercising the search power may use reasonable force in order to effect entry into or onto the place if— (a) (b) subclause (2) applies; or following a request, the person present refuses entry or does not allow entry within a reasonable time.
If the occupier of a place is not present at any time during the search, the person carrying out the search must,— (a) on completion of the search, leave a copy of the author- 35 ity referred to in subclause (1)(b)(i) and the notice re- ferred to in subclause (5) in a prominent position at the place; or 30 (2) (3) (4) 196 (5) (6) (7) 19 (1) Insurance (Prudential Supervision) Bill Schedule 2 (b) if this is not reasonably practicable, provide the copy of the authority referred to in subclause (1)(b)(i) and the notice referred to in subclause (5) to the occupier of the place no later than 7 days after the exercise of the power.
5 The notice required by subclause (4) is a written notice con- taining the following particulars: (a) the date and time of the commencement and completion of the search: the name or unique identifier of the person who had 10 overall responsibility for that search: the address of the office to which inquiries should be made: if nothing is seized, the fact that nothing was seized: if anything was seized, the fact that seizure occurred 15 and (if an inventory is not provided at the same time under clauses 19 to 21) that an inventory of the things seized will be provided to the occupier of the place no later than 7 days after the seizure.
(b) (c) (d) (e) For the purposes of this clause and clauses 19 to 21,— (a) the following persons may not be treated as the occupier of the place: (i) (ii) any person who is under 14 years of age: any person who the person executing the warrant has reasonable grounds to believe is not the oc- 25 cupier of the place: 20 (b) every reference to a copy of the authority referred to in subclause (1)(b)(i) means, in a case where a search is undertaken without a search warrant, written advice about the enactment that authorises the search.
Subclauses (4) and (5) are subject to clauses 20 and 21.
30 Inventory of items seized The person who carries out a search must, at the time he or she seizes any thing, or as soon as practicable after the seizure of any thing, and in any case not later than 7 days after that 35 seizure, provide to the occupier of the place from where the seizure took place, and to every other person who the person 197 Schedule 2 Insurance (Prudential Supervision) Bill who carried out the search has reason to believe is the owner of the thing that was seized,— (a) (b) written notice specifying what was seized; and a copy of the authority referred to in clause 18(1)(b)(i).
(2) A written notice referred to in subclause (1)(a)— 5 (a) must contain information about the extent to which a person from whom a thing was seized or the owner of the thing has a right to apply— (i) (ii) to have access to the thing; or to have access to any document relating to the 10 application for a search warrant or the exercise of any other search power that led to the seizure; and (b) must contain information about the right to bring a (c) claim that any privileged or confidential information 15 has been seized; but need not be provided to the occupier of the place from which the seizure took place, if the person who carries out the search is satisfied that none of the items seized are owned by that person.
20 If the occupier is not present at the time of seizure, a written notice referred to in subclause (1)(a) and a copy of the au- thority referred to in clause 18(1)(b)(i) may be provided to that person by leaving the notice in a prominent position at the place.

Subclause (1) is subject to subclauses (2) and (3).

This clause is subject to clauses 20 and 21.


25 Compliance with certain provisions may be deferred in certain circumstances (3) (4) (5) 20 (1) A person exercising a search power may apply to a District 30 Court Judge for a postponement of the obligation to comply with clause 18(4) or (5) or 19 on the grounds that compli- ance would— (a) (b) endanger the safety of any person; or prejudice ongoing investigations.
(2) An application may be made under subclause (1),— 35 198 Insurance (Prudential Supervision) Bill Schedule 2 (a) (b) in the case of an entry and search power that is a search warrant, at the time of the initial application or until the expiry of 7 days after the warrant is finally executed; and in the case of any other entry and search power, until 5 the expiry of 7 days after the search power is exercised.
(3) On an application under subclause (1), the District Court Judge may postpone for a specified period not exceeding 12 months the obligation to comply with clause 18(4) or (5) or 19, if the Judge is satisfied there are reasonable grounds for 10 believing that compliance would— (a) (b) endanger the safety of any person; or prejudice ongoing investigations.
21 Further postponement of, or dispensation from, obligation to comply with certain provisions 15 (1) A person who has obtained an order under clause 20(3) may, before the expiry of that order, apply to a District Court Judge for a further postponement of, or dispensation from, the obli- gation to comply with clause 18(4) or (5) or 19 on the grounds that compliance would— (a) (b) endanger the safety of any person; or prejudice ongoing investigations.
(2) An application for a further postponement may be made on 20 only 1 occasion.

(3) On an application under subclause (1), the District Court 25 Judge may postpone for a further specified period not exceed- ing 12 months, or order a permanent dispensation from, the obligation to comply with clause 18(4) or (5) or 19 if the Judge is satisfied that compliance would— endanger the safety of any person; or (a) prejudice ongoing investigations.
(b) 30 (4) A District Court Judge may not grant, under subclause (3), any postponement of, or dispensation from, an obligation in re- spect of any thing that has been seized, unless the thing seized is— (a) (b) a copy or clone of any information taken or made; or a thing the possession of which by the person from whom it was seized is unlawful under New Zealand law.
35 199 Schedule 2 Insurance (Prudential Supervision) Bill Privileges 22 (1) (2) (3) Privileges If a person could, in a criminal proceeding, assert a privilege under sections 54 to 57 of the Evidence Act 2006 in respect of any communication or information, the person is taken to 5 have the same privilege for the purposes of a search warrant or exercise of any other search power under this schedule.
Subclause (3) applies to documents that are books of account or accounting records kept— (a) by a solicitor in relation to any trust account money 10 that is subject to section 112 of the Lawyers and Con- veyancers Act 2006; or by a nominee company that— (i) (b) is subject to practice rules made by the Council of the New Zealand Law Society pursuant to section 15 96 of the Lawyers and Conveyancers Act 2006; and is operated by a barrister and solicitor or an in- corporated law firm as a nominee in respect of securities and documents of title held for clients.
20 (ii) (b) The application by subclause (1) of section 54 of the Evi- dence Act 2006 (which relates to the privilege for communi- cations with legal advisers) does not prevent, limit, or affect— the issuing of a search warrant or exercise of any other (a) search power in respect of a document to which this 25 subclause applies; or the obligation to comply with that search warrant or other search power in respect of a document to which this subclause applies; or the admissibility, in a criminal proceeding for an of- 30 fence described in the search warrant, or for an offence in respect of which any other search power was exer- cised, of any evidence that relates to the contents of a document obtained under the search warrant or as the result of the exercise of any other search power.
(c) 35 (a) (4) A person who has a privilege under this clause has the right— to prevent the search under this Act of any communica- tion or information to which the privilege would apply if it were sought to be disclosed in a proceeding: 200 Insurance (Prudential Supervision) Bill Schedule 2 (b) to require the return of any such communication or in- formation to the person if it is seized or secured by a per- son exercising a search power pending determination of the claim to privilege.
(5) Section 65 of the Evidence Act 2006 (which relates to waiver 5 of privilege) applies in respect of any privilege under this clause.

(6) Nothing in this clause affects the application of section 60 of the Evidence Act 2006 (which relates to the privilege against self-incrimination).
10 23 (1) (2) Searches affecting privileged materials This clause applies if— (a) (b) a person executes a search warrant; or a person exercising a search power has reasonable grounds to believe that any thing discovered in the 15 search may be the subject of a privilege referred to in clause 22(1).
If this clause applies, the person responsible for executing the search warrant or other person exercising the search power— (a) must provide to any person who he or she believes may 20 be able to claim a privilege referred to in clause 22(1) a reasonable opportunity to claim it; and (b) may, if the person executing the search warrant or ex- ercising the other search power is unable to identify or contact a person who may be able to claim a privilege, 25 or that person’s lawyer, within a reasonable period,— (i) apply to a District Court for a determination as to the status of the thing; and do any thing necessary to enable that court to make that determination.
(ii) 24 Interim steps pending resolution of privilege claim If a person executing a search warrant or exercising a search power is prohibited under clause 22 or 23 from searching any thing, the person— (a) may— (i) secure the thing; and 201 30 35 Schedule 2 Insurance (Prudential Supervision) Bill (ii) (iii) if the thing is intangible (for example, computer data), secure the thing by making a forensic copy; and deliver the thing, or a copy of it, to the District Court, to enable the determination of a claim to 5 privilege; and (b) must supply to the lawyer or other person who may or does claim privilege a copy of, or access to, the secured thing; and (c) must not search the thing secured, unless no claim of 10 privilege is made, or a claim of privilege is withdrawn, or the search is in accordance with the directions of the court determining the claim of privilege.
25 Claims for privilege for things sought to be seized or seized Any person who wishes to claim privilege in respect of any thing sought to be seized or seized by a person executing a search warrant or exercising a search power— (a) must provide to the person responsible for executing the 15 search warrant or exercising the other search power a 20 particularised list of the things in respect of which the privilege is claimed, as soon as practicable after being provided with the opportunity to claim privilege or be- ing advised that a search is to be, or is being, or has been conducted, as the case requires: if the thing or things in respect of which the privilege is claimed cannot be adequately particularised in accord- ance with paragraph (a), may apply to a District Court for directions or relief (with a copy of the thing provided under clause 24(b)).
25 30 (b) Admission of evidence If a District Court upholds a claim to privilege under clauses 22 to 25 in respect of any communication or information, the communication or information to which the privilege applies is not admissible in any proceedings arising from, or related 35 to, the execution of the search warrant or exercise of the other search power, as the case requires.
26 (1) 202 (2) 27 (1) (2) Insurance (Prudential Supervision) Bill Schedule 2 Subject to subclause (1), this schedule does not limit or affect the admissibility of any evidence, or the discretion of any court to admit or refuse to admit any evidence, in any proceedings.
Disposal of things seized 5 Disposal of things seized In any proceedings relating to any thing seized under a search warrant or the exercise of any other search power under this schedule, the court may order, either at the trial or hearing or on an application, that the thing be delivered to the person appearing to the court to be entitled to it, or that it be otherwise 10 disposed of in any manner that the court thinks fit.
The Bank or an investigator may, at any time, unless an order has been made under subclause (1), return the thing to the person from whom it was seized, or apply to a District Court Judge for an order for its disposal.

15 (4) (3) On any such application, the District Court Judge may make any order that a court may make under subclause (1).
If proceedings for an offence relating to the thing are not brought within a period of 3 months of seizure, any person claiming to be entitled to the thing may, after the expiry of 20 that period, apply to a District Court Judge for an order that it be delivered to him or her.

(5) On any such application, the District Court Judge may— (a) adjourn the application, on any terms that he or she thinks fit, for proceedings to be brought; or 25 (b) make any order that a court may make under subclause (1).
28 (1) Court order for disposal of things seized to be suspended on conviction If any person is convicted in any proceedings for an offence 30 relating to anything for which a search warrant has been is- sued, and any order is made under clause 27, the operation of the order is suspended,— (a) in any case, until the expiration of the time prescribed by the Summary Proceedings Act 1957 for the filing of 35 203 Schedule 2 Insurance (Prudential Supervision) Bill (b) (c) a notice of appeal or an application for leave to appeal; and if a notice of appeal is filed within the time so pre- scribed, until the determination of the appeal; and if application for leave to appeal is filed within the time 5 so prescribed, until the application is determined, and, if leave to appeal is granted, until the determination of the appeal.
If the operation of any such order is suspended until the deter- mination of the appeal, the court determining the appeal may, 10 by order, cancel or vary the order.

Immunities Immunities in relation to exercise of entry or search powers Every person is immune from civil or criminal liability— (a) for any act done in good faith in order to obtain a search warrant: for any act done in good faith in relation to the execution of a search warrant, if the execution is carried out in a reasonable manner.
(b) Every person is immune from civil and criminal liability for any act done in good faith in order to exercise an entry power or search power if— (a) the power is exercised by that person in a reasonable manner; and the person believes on reasonable grounds that the pre- conditions for the exercise of that power have been sat- isfied.
(b) 15 20 25 Every person is immune from civil and criminal liability for any act done in good faith and in a reasonable manner in order 30 to assist a person to exercise an entry power or a search power or in order to examine or analyse any thing that is seized.

In any civil proceeding in which a person asserts that he or she has an immunity under this clause, the onus is on that person to prove those facts necessary to establish the basis of the claim.
35 (2) 29 (1) (2) (3) (4) 204 Insurance (Prudential Supervision) Bill Schedule 2 30 31 32 Immunity of Bank If any person is immune from civil liability under clause 29 in respect of anything done or omitted to be done, the Bank is also immune from civil liability in tort in respect of that person’s conduct.
5 Offences False application for search warrant Every person commits an offence, and is liable on summary conviction to imprisonment for a term not exceeding 1 year, who makes an application for a search warrant that contains 10 any assertion or other statement known by the person to be false.
Offence of failing to carry out obligations in relation to computer search Every person commits an offence, and is liable on summary 15 conviction to imprisonment for a term not exceeding 3 months, who fails, without reasonable excuse, to assist a person exer- cising a search power when requested to do so under clause 17.
205 Schedule 3 Insurance (Prudential Supervision) Bill Schedule 3 Consequential amendments Part 1 Amendments to Reserve Bank of New Zealand Act 1989 Paragraph (a) of the definition of financial institution in section 2(1): repeal and substitute: s 232 5 “(a) an insurer that issues, or is liable under, life policies within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2009; and includes any 10 branch, division, or office of that insurer; and”.
Section 2(1): insert in its appropriate alphabetical order: “licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2009”.

insert “or the Insurance (Prudential Supervision) Act 15 Section 39: 2009” after “this Act”.

Section 41(1): add: “and the Insurance (Prudential Supervision) Act 2009”.

Section 41(2): insert “, or the Insurance (Prudential Supervision) Act 2009,” after “this Act”.
Section 41: repeal and substitute: “41 Duties of Governor “(1) It is the duty of the Governor to ensure that the Bank carries out the functions imposed on it by— “(a) “(b) this Act; and the Anti-Money Laundering and Countering Financing of Terrorism Act 2009; and the Insurance (Prudential Supervision) Act 2009.
“(c) 20 25 “(2) The Governor has the authority, in the performance of those functions, to act in relation to all matters that are not by this 30 Act, or either of the following Acts, required to be dealt with by the Board: “(a) the Anti-Money Laundering and Countering Financing of Terrorism Act 2009: the Insurance (Prudential Supervision) Act 2009.” 35 insert “or of a licensed insurer” after “section “(b) Section 46(1)(b): 157C”.
206 Insurance (Prudential Supervision) Bill Schedule 3 Part 1—continued 5 insert “or a licensed insurer” after “section insert “or a licensed insurer” after “section Section 49(2)(h)(iii): 157C”.

Section 50(2)(d)(iii): 157C”.
Section 51(5): repeal and substitute: “(5) Subject to any general or special directions given or conditions attached by the Governor, any person to whom any powers or functions are delegated under this section may exercise them in the same manner and with the same effect as if they had been conferred directly by this Act or under either of the following 10 Acts, and not by delegation: “(a) the Anti-Money Laundering and Countering Financing of Terrorism Act 2009: the Insurance (Prudential Supervision) Act 2009.” “(b) Section 51: add: “(9) To avoid doubt, the Governor’s functions and powers include his or her functions and powers under the Insurance (Pruden- tial Supervision) Act 2009.” 15 Section 51(9): repeal and substitute: “(9) To avoid doubt, the Governor’s functions and powers include 20 his or her functions and powers under the following Acts: “(a) the Anti-Money Laundering and Countering Financing of Terrorism Act 2009: the Insurance (Prudential Supervision) Act 2009.” “(b) insert “or a licensed insurer” after “section 25 Section 53(3)(f)(iii): 157C”.
Section 58(b): insert “or a licensed insurer” after “bank”.

Section 68A: insert “or the Insurance (Prudential Supervision) Act 2009” after “this Part”.

Section 162AB(1)(a) and (b): insert “and under the Insurance (Pru- 30 dential Supervision) Act 2009” after “5D”.

207 Schedule 3 Insurance (Prudential Supervision) Bill Part 2 Amendments to other Acts Accident Compensation Act 2001 (2001 No 49) Section 123(2)(b)(ii): repeal.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009 (2009 No 35) Section 5: insert in its appropriate alphabetical order: 5 “life insurance policy means a life policy within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2009”.

10 Paragraph (a)(xii) of the definition of financial institution in section 5: repeal and substitute: “(xii) issuing, or undertaking liability under, life insur- ance policies as an insurer:”.
Companies Act 1993 (1993 No 105) Section 2(1): insert in its appropriate alphabetical order: 15 “licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2009”.

Section 223: insert after paragraph (d): “(da) if an amalgamating company is a licensed insurer, a 20 copy of the written approval of the Reserve Bank of New Zealand given under section 42 of the Insurance (Prudential Supervision) Act 2009; and”.
Section 236: insert after subsection (2): “(2A) If the arrangement or amalgamation or compromise involves 25 a transfer or amalgamation that requires the written approval of the Reserve Bank of New Zealand under section 42 of the Insurance (Prudential Supervision) Act 2009, the Court may not make an order under this section unless that approval has been given.” 30 208 Insurance (Prudential Supervision) Bill Schedule 3 Companies Act 1993 (1993 No 105)—continued Part 2—continued New section 239EA: insert after section 239E: “239EA Voluntary administration of licensed insurers If a company is a licensed insurer, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Prudential Supervision) Act 2009.” 5 Section 239L: add: “(3) In the case of a licensed insurer, the Court may appoint an administrator on the application of the Reserve Bank of New Zealand or a person referred to in subsection (1) if— “(a) “(b) subsection (2)(a) or (b) apply; or the insurer is failing to maintain a solvency margin (within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2009).” New section 240A: insert after section 240: “240A Liquidation of licensed insurers If a licensed insurer may be put into liquidation under or in accordance with this Part, this Part applies in respect of the insurer subject to subpart 3 of Part 4 of the Insurance (Pru- dential Supervision) Act 2009.” Section 241(2)(c): add: “(vii) in the case of a licensed insurer, the Reserve Bank of New Zealand; or”.
10 15 20 Section 258A: repeal and substitute: “258A Duty to report suspected offences “(1) A liquidator of a company who considers that an offence that is 25 material to the liquidation has been committed by the company or any director of the company against this Act or any of the following Acts must report that fact to the Registrar: “(a) “(b) “(c) “(d) “(e) “(f) the Crimes Act 1961: the Securities Act 1978: the Securities Markets Act 1988: the Financial Reporting Act 1993: the Takeovers Act 1993: the Insurance (Prudential Supervision) Act 2009.
30 209 Schedule 3 Insurance (Prudential Supervision) Bill Companies Act 1993 (1993 No 105)—continued Part 2—continued “(2) A report made under subsection (1), and any communica- tions between the liquidator and Registrar relating to that re- port, are protected by absolute privilege.

If the company is a licensed insurer, a copy of the report made under subsection (1) must be sent to the Reserve Bank of 5 New Zealand.
“(3) “(4) A copy of a report sent under subsection (3), and any com- munications between the liquidator and Reserve Bank of New Zealand relating to that report, are protected by absolute priv- ilege.
10 “(5) A liquidator who fails to comply with subsection (1) or (3) commits an offence and is liable on conviction to the penalty set out in section 373(2).” Section 332(b): add “; or” and also the following subparagraph: “(x) enters into a contract of insurance as an insurer 15 with a policyholder in New Zealand (being a con- tract that is governed by the laws of an overseas country) New Zealand policyholder (within the meaning of section 6(1) of the Insurance (Pru- dential Supervision) Act 2009).” 20 Section 373(2)(ma): repeal and substitute: “(ma) section 258A(5) (which relates to the duty of liquid- ators to report suspected offences):”.
Corporations (Investigation and Management) Act 1989 (1989 No 11) Section 8: repeal and substitute: “8 Consultation with Reserve Bank “(1) For the purposes of this section— “licensed insurer means a licensed insurer within the meaning of the Insurance (Prudential Supervision) Act 2009 “registered bank means a registered bank within the meaning of section 2(1) of the Reserve Bank of New Zealand Act 1989.
25 30 210 Insurance (Prudential Supervision) Bill Schedule 3 Part 2—continued Corporations (Investigation and Management) Act 1989 (1989 No 11)—continued “(2) The Registrar must consult the Reserve Bank of New Zealand before— “(a) “(b) “(c) giving a written notice requiring any licensed insurer or registered bank to supply any information under section 9: appointing any person to carry out an investigation of the affairs of any licensed insurer or registered bank under section 19: giving a written notice to any licensed insurer or regis- tered bank that it is considered to be a corporation at 10 risk.
5 “(3) The Securities Commission must consult with the Reserve Bank of New Zealand before making a recommendation to the Minister under section 38 in respect of any licensed insurer or registered bank.” Financial Reporting Act 1993 (1993 No 106) Section 2(1): insert in its appropriate alphabetical order: “licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2009”.
Section 4(1): insert after paragraph (d): “(da) every licensed insurer (other than a Lloyd’s underwriter within the meaning of the Insurance (Prudential Super- vision) Act 2009 or an insurer that is included in a class of insurers that is the subject of an exemption under section 229A(1)(b) of that Act):”.
Section 16: insert after subsection (1): “(1A) Section 79 of the Insurance (Prudential Supervision) Act 2009 applies in respect of a reporting entity that is a licensed insurer.” Section 35A: add: “(6) The Securities Commission must not grant an exemption under this section in respect of an issuer that is a licensed insurer.” 15 20 25 30 211 Schedule 3 Insurance (Prudential Supervision) Bill Part 2—continued Financial Service Providers (Registration and Dispute Resolution) Act 2008 (2008 No 97) Paragraph (a) of the definition of insurance business in section 4: repeal.
Schedule 2: add: 5 Reserve Bank of New Zealand Licensed insurers Insurance Supervision) Act 2009 (Prudential Financial Transactions Reporting Act 1996 (1996 No 9) Definition of life insurance policy in section 2(1): repeal and sub- stitute: “life insurance policy means a life policy within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 10 2009”.

Section 3(1)(b): repeal and substitute: “(b) an insurer that issues, or is liable under, life insurance policies:”.
Friendly Societies and Credit Unions Act 1982 (1982 No 118) Section 2: insert in its appropriate alphabetical order: “licensed insurer has the same meaning as in section 6(1) of the Insurance (Prudential Supervision) Act 2009”.

Section 11(3): repeal.

Section 11: insert after subsection (3): “(3A) Subsection (3) does not apply to a licensed insurer.” Section 42: repeal.

Section 42: add: “(4) This section does not apply to a licensed insurer.” Section 74(5): add “or licensed insurers”.
Section 76: add: “(5) This section does not apply to a licensed insurer.” Section 77: add as subsection (2): “(2) This section does not apply to a licensed insurer.” 15 20 25 212 Insurance (Prudential Supervision) Bill Schedule 3 Part 2—continued Injury Prevention, Rehabilitation, and Compensation Act 2001 (2001 No 49) Section 123(2)(b)(ii): repeal and substitute: “(ii) an insurer that issues, or is liable under, life poli- cies within the meaning of section 6(1) of the 5 Insurance (Prudential Supervision) Act 2009; or”.
Insolvency (Cross-border) Act 2006 (2006 No 57) Paragraph (h)(i) of article 2 of Schedule 1: repeal and substitute: “(i) a statutory manager appointed under subpart 4 10 of Part 4 of the Insurance (Prudential Supervi- sion) Act 2009; or”.
Insurance Law Reform Act 1977 (1977 No 14) New section 12A: insert after section 12: “12A Application for shares in company not to be contained 15 in proposal for insurance “(2) “(1) A form of proposal for insurance that contains or purports to be an application for shares in a company must not be issued by or on behalf of the company.
If any person makes a proposal for insurance to a company, 20 the company must not allot shares to that person without first receiving an application for shares that is contained in a docu- ment separate from the proposal for insurance.
If a company contravenes this section,— “(a) “(3) the company commits an offence and is liable on sum- 25 mary conviction to a fine not exceeding $10,000: every director of the company commits an offence and is liable on summary conviction to a fine not exceeding $10,000 if it is proved— “(i) that the act that constituted the offence under 30 paragraph (a) took place with his or her author- ity, permission, or consent; or that he or she— “(ii) “(b) 213 Schedule 3 Insurance (Prudential Supervision) Bill Insurance Law Reform Act 1977 (1977 No 14)—continued Part 2—continued “(A) knew, or could reasonably be expected to have known, that the offence under para- graph (a) was to be or was being commit- ted; and failed to take reasonable steps to prevent 5 or stop it.
“(B) “(4) Nothing in this section affects the validity of a policy of insur- “(5) ance or of an allotment of shares of a company.

In this section, company has the same meaning as in section 2 of the Companies Act 1993.

“Compare: 1994 No 117 s 33”.

10 Life Insurance Act 1908 (1908 No 105) Section 64: omit “ in the answer of such company given to the tenth question of Schedule 7 hereto”.

Life Insurance Amendment Act 1920 (1920 No 84) Section 11: repeal.
15 Privacy Act 1993 (1993 No 28) Part 1 of Schedule 2: insert in its appropriate alphabetical order: Insurance (Prudential Supervision) Act 2009 Section 222 Proceeds of Crime Act 1991 (1991 No 120) Paragraph (a) of the definition of financial institution in section 2(1): 20 repeal and substitute: “(a) an insurer that issues, or is liable under, life policies within the meaning of section 6(1) of the Insurance (Prudential Supervision) Act 2009; and includes any branch, division, or office of that insurer; and”.
25 214 Insurance (Prudential Supervision) Bill Part 3 Amendments to regulations Overseas Investment Regulations 2005 (SR 2005/220) Regulation 33(1)(k)(ii): revoke and substitute: “(ii) the investment is of funds held in the overseas 5 person’s— “(A) Life Insurance Fund within the meaning of section 15 of the Life Insurance Act 1908 if the overseas person carries on any other business; or statutory fund or funds (within the mean- ing of section 6(1) of the Insurance (Pru- dential Supervision) Act 2009):”.
“(B) 10 Securities Regulations 2009 (SR 2009/230) Clause 12(4) of Schedule 5: revoke and substitute: “(4) The date of the latest appointed actuary’s report in respect of the life insurance company that has been prepared under sec- tion 78 of the Insurance (Prudential Supervision) Act 2009), and the period to which the report relates.” 15 Clause 13(b): omit “actuarial” and substitute “appointed actuary’s”.
20 Legislative history 29 October 2009 8 December 2009 Introduction (Bill 95–1) First reading and referral to Finance and Expenditure Committee 12 Published under the authority of the House of Representatives—2010 Wellington, New Zealand: 215