Source document: https://docs-lawep.s3.us-east-2.amazonaws.com/1698837636634.pdf (New Zealand)
Insurance (Prudential Supervision) Amendment Bill Government Bill As reported from the Finance and Expenditure Committee Commentary Recommendation The Finance and Expenditure Committee has examined the Insurance (Prudential Supervision) Amendment Bill and recommends that it be passed with the amendments shown.

Introduction The bill seeks to amend the Insurance (Prudential Supervision) Act 2010, which established a licensing and prudential supervision regime for insurers operating in New Zealand.
It would also make a consequential amendment to the Reserve Bank of New Zealand Act 1989.

The amendments proposed in the bill are generally minor and tech- nical in nature.

They aim to improve the Act’s effectiveness and en- sure a smooth transition to full licensing of insurers in September 2013, by amending provisions that are unnecessary or impose un- warranted compliance costs, and by addressing technical issues.
80—2 2 Insurance (Prudential Supervision) Amendment Bill Commentary We note that the Reserve Bank intends a policy review of the Act within five years after September 2013, to consider how well the regime is operating and whether further changes are desirable.

This commentary discusses the more significant amendments we rec- ommend to the bill.

It does not discuss minor or technical amend- ments.
Provision of interim financial information We recommend an amendment to clause 11(2), amending section 81(2) of the Act, to extend from 3 months to 4 months the period in which interim financial information must be prepared and given to the Reserve Bank.

We consider the change appropriate as it would be aligned with the timeframe for annual financial reporting supported by the Commerce Committee in its report on the Financial Reporting Bill.
Provisional licences We recommend amendments to clause 16 to extend the circumstances in which a provisional licence would continue in force.

The new cir- cumstances would include situations where an application for a full licence had been declined, or where the insurer had been directed to cease entering into new insurance contracts.
Under the Act, provi- sionally-licensed insurers would not qualify for a full licence if they were in distress management, so the Reserve Bank’s regulatory over- sight would cease when provisional licences expire in September 2013.

We recognise that it may be desirable for the Reserve Bank to remain involved to oversee the orderly resolution of such a situ- ation, so there are grounds for provisional licences to be extended beyond September 2013.
Changes we recommend to amend section 246(1A) and insert new section 246(1B) would provide for the provisional licence to remain in force in such circumstances, until the Reserve Bank was satisfied that it could be cancelled under section 246(2).

We also recommend the insertion of new subparagraph (v) in section 246(2)(c) to allow the Reserve Bank to cancel a provisional licence that had been extended beyond September 2013 if it considered it appropriate to do so.
For example, if liquidation were the appropriate option, the licence might be unnecessary.

Insurance (Prudential Supervision) Amendment Bill 3 Commentary Appendix Committee process The Insurance (Prudential Supervision) Amendment Bill was re- ferred to the committee on 8 May 2013.

The closing date for submissions was 14 June 2013.

We received and considered four submissions from interested groups, and heard from two submitters.

We received advice from the Reserve Bank of New Zealand.
Committee membership Paul Goldsmith (Chairperson) Maggie Barry David Bennett Hon Clayton Cosgrove Hon David Cunliffe John Hayes Dr Russel Norman Hon David Parker Rt Hon Winston Peters Jami-Lee Ross Hon Kate Wilkinson Julie Anne Genter replaced Dr Russel Norman for this item of busi- ness.
Insurance (Prudential Supervision) Amendment Bill Key to symbols used in reprinted bill As reported from a select committee text inserted unanimously text deleted unanimously Hon Bill English Insurance (Prudential Supervision) Amendment Bill Government Bill Contents Title Commencement Part 1 Amendments to Insurance (Prudential Supervision) Act 2010 Principal Act Section 21 amended (Conditions of licence) Section 25 amended (Bank must notify applicant of decision and give notice on its Internet site) Section 30 amended (Cancellation of licence) New section 54A and cross-heading inserted Register Register 54A Section 58 repealed (Incorporation by reference) Section 60 amended (Licensed insurer must have current financial strength rating) Section 64 amended (Disclosure of current rating to policyholder) Section 81 amended (Financial statements must be given to Bank) New section 217A inserted (Time for filing charging document) 217A Time for filing charging document 80—2 Page 2 2 2 3 3 3 3 3 4 4 4 4 5 5 1 cl 1 Insurance (Prudential Supervision) Amendment Bill Section 232 amended (General provisions relating to declarations and exemptions) Section 237 amended (Regulations) New section 238A and cross-heading inserted Incorporation by reference 238A Incorporation by reference Section 246 amended (Duration of provisional licence) Schedule 1 amended Part 2 Amendments to Reserve Bank of New Zealand Act 1989 Principal Act Section 69 amended (Register) Section 173 amended
 (Regulations) 6 6 6 6 6 8 9 9 9 The Parliament of New Zealand enacts as follows: Title This Act is the Insurance (Prudential Supervision) Amend- ment Act 2012.
Commencement This Act comes into force on the day after the date on which it receives the Royal assent.

5 Principal Act This Act amends the Insurance (Prudential Supervision) Act 2010 (the principal Act).

10 Part 1 Amendments to principal Act Insurance (Prudential Supervision) Act 2010 Principal Act This Part amends the Insurance (Prudential Supervision) Act 15 2010 (the principal Act).
1 2 3 3 2 4 5 (1) 6 7 Insurance (Prudential Supervision) Amendment Bill Part 1 cl 7 Section 21 amended (Conditions of licence) Replace section 21(2)(f) with: “(f) a condition that requires the licensed insurer or the dir- ectors of the insurer (or both) to certify that 1 or more of the following have been complied with (being certifica- 5 tion that is given at the time or times and in the manner specified in the condition): any conditions of the licence: “(i) “(ii) any requirements of this Act or the regulations: “(iii) any requirements of any other enactment im- 10 posed on the insurer as a licensed insurer (for example, financial reporting obligations):”.
Section 25 amended (Bank must notify applicant of decision and give notice on its Internet site) In the heading to section 25, replace “its Internet site” with 15 “register”.

Replace section 25(3) with: (2) “(3) The Bank must give notice of the issue of a licence on the register kept under section 54A.” Section 30 amended (Cancellation of licence) In section 30(2), replace “subsection (1)(a)(i) to (vi)” with “subsection (1)(a)(ii) to (vi)”.
20 New section 54A and cross-heading inserted After section 54, insert: “Register “54A Register “(1) The Bank must keep a public register of licensed insurers.

“(2) The Bank must determine the form of the register and may amend the form as it considers necessary.
“(3) The register may must include— “(a) “(b) “(c) the name of each licensed insurer; and the current financial strength rating of each licensed in- surer (unless the insurer is not required to have such a rating); and any other prescribed information.

3 25 30 35 Part 1 cl 8 Insurance (Prudential Supervision) Amendment Bill “(4) The Bank must take all reasonable steps to ensure that the in- formation contained in the public register is available to mem- bers of the public at all reasonable times.
“Compare: 1989 No 157 s 69”.

8 9 (1) Section 58 repealed (Incorporation by reference) Repeal section 58.
Section 60 amended (Licensed insurer must have current financial strength rating) Replace section 60(2)(c) with: “(c) “(d) a captive insurer; or an insurer that is exempted under subsection (2A).” 5 10 (2) After section 60(2), insert: “(2A) The Bank may, by notice to a licensed insurer, exempt the insurer from compliance with subsection (1) if the Bank is satisfied that the insurer has ceased to enter into new contracts 15 of insurance as an insurer.
“(2B) Subsection (2A) is subject to section 232 (which provides for general provisions relating to exemptions).” 10 Section 64 amended (Disclosure of current rating to policyholder) After section 64(4), insert: “(4A) If a contract of insurance is renewed, the licensed insurer is not required to comply with subsection (1) if— “(a) the contract is of a kind that is renewable more fre- quently than annually; and the information referred to in that subsection was dis- closed in writing to the policyholder less than 12 months before the date of the renewal; and that information has not changed since the last disclos- ure was made to the policyholder under this section.” “(b) “(c) 20 25 30 Section 81 amended (Financial statements must be given to Bank) In the heading to section 81, after “statements”, insert “and interim financial information”.
11 (1) 4 Insurance (Prudential Supervision) Amendment Bill Part 1 cl 12 Replace section 81(2) to (4) with: (2) “(2) A licensed insurer must, within 3 4 months after the end of the “(b) first half of each accounting period of the insurer,— interim financial “(a) information for that prepare half-period that complies with subsection (3); and ensure that copies of that information together with a copy of the auditor’s report on the information (if any) are given— “(i) “(ii) to the Bank; and for registration to the Registrar if this is required 10 by the regulations.
5 “(3) The interim financial information must— “(a) comply with— “(i) “(ii) generally accepted accounting practice; or requirements specified by the Bank in a written 15 notice given to the insurer (for example, regu- latory requirements that apply in the insurer’s home jurisdiction); and “(b) be audited if required by the regulations.
If subsection (3)(a)(i) applies, the interim financial informa- 20 tion must be interim financial statements prepared in respect of— “(a) the insurer if the insurer, at the end of the half-period, has no subsidiaries; or a group comprising the insurer and its subsidiaries in 25 any other case.
“(b) “(4) “(4A) In this section, generally accepted accounting practice, Registrar, and subsidiaries have the same meanings as in the Financial Reporting Act 1993.” 12 New section 217A inserted (Time for filing charging document) After section 217, insert: 30 “217A Time for filing charging document Despite anything to the contrary in section 25 of the Criminal Procedure Act 2011, the limitation period in respect of an of- 35 fence under this Act ends on the date that is 5 years after the date on which the offence was committed.” 5 Part 1 cl 13 Insurance (Prudential Supervision) Amendment Bill 10 15 13 14 (1) (2) 15 Section 232 amended (General provisions relating to declarations and exemptions) After section 232(2)(b), insert: “(ba) section 60(2A) (which relates to exemptions for in- surers in run-off from the requirement to have a current 5 financial strength rating):”.
Section 237 amended (Regulations) In section 237(1)(j), replace “statements” with “information”.

In section 237(1)(v), replace “section 226” with “section 54A or 226”.

New section 238A and cross-heading inserted After section 238, insert: “Incorporation by reference “238A Incorporation by reference “(1) This section applies to the following instruments: a declaration under section 9: a fit and proper standard: a solvency standard: regulations.
“(a) “(b) “(c) “(d) “(2) The following written material may be incorporated by refer- 20 ence in an instrument referred to in subsection (1): “(a) standards, requirements, or recommended practices of 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 as part of, the instrument.
“(b) “(c) “(3) Schedule 1 applies to any material incorporated by reference in an instrument referred to in subsection (1).” 25 30 Section 246 amended (Duration of provisional licence) 16 (1) After section 246(1), insert: “(1A) Despite subsection (1), if, immediately before the date that is 3 years after the date on which this Act receives the Royal assent, an entity that still holds a provisional licence is subject 35 6 Insurance (Prudential Supervision) Amendment Bill Part 1 cl 16 to an insolvency proceeding or process, the provisional licence remains in force until it is cancelled under subsection (2).
“(1A) Subsection (1B) applies to an entity if— “(a) the entity still holds a provisional licence immediately before the date (the 3-year date) that is 3 years after the 5 date on which this Act receives the Royal assent; and “(b) 1 or more of the following apply to the entity: “(i) “(ii) the entity is, immediately before the 3-year date, subject to an insolvency proceeding or process: an application for a licence for the entity under 10 section 17 was refused or declined at any time before the 3-year date: “(iii) a direction under section 143 has, at any time be- fore the 3-year date, been given to the entity re- quiring the entity to cease entering into any new 15 contracts of insurance.
“(1B) Despite subsection (1), if this subsection applies to an entity, the provisional licence of the entity remains in force until it is cancelled under subsection (2).” Replace section 246(2)(b) with: “(b) (2) 20 the Bank is satisfied that the holder has ceased to carry on insurance business in New Zealand; or in the case of subsection (1A) (1B), the Bank is satis- fied that— “(i) the holder is no longer subject to an insolvency 25 proceeding or process; or the holder is a company that has been removed from the New Zealand register (within the mean- ing of the Companies Act 1993); or “(ii) “(c) “(iv) “(iii) the holder is an overseas company that has been 30 removed from the overseas register (within the meaning of the Companies Act 1993); or the holder has been liquidated, wound up, or dis- solved or has otherwise ceased to exist.
; or for any other reason, it is no longer appropriate 35 for the provisional licence to remain in force.” “(v) (3) After section 246(2), insert: “(3) Subsection (2)(c) does not limit subsection (2)(a) or (b).
7 Part 1 cl 17 Insurance (Prudential Supervision) Amendment Bill In this section, an entity is subject to an insolvency proceed- ing or process if any of the following apply: “(a) “(b) “(c) “(d) “(e) “(f) “(g) the entity is in liquidation under the Companies Act 1993 or under any other Act: the entity is in voluntary administration or subject to a 5 deed of company arrangement: a receiver has been appointed and is acting in relation to the whole, or substantially the whole, of the assets and the undertaking of the entity: the entity is subject to a compromise with its creditors 10 that has been approved under Part 14 of the Companies Act 1993: an order that an arrangement or a compromise is bind- ing on the entity has been made under Part 15 of the Companies Act 1993: the entity is in statutory management under this Act, the Corporations (Investigation and Management) Act 1989, or any other enactment: in the case of an overseas person, the overseas person is subject to a proceeding or process in its home jurisdic- 20 tion that is similar to any of those set out in paragraphs (a) to (f).” 15 Schedule 1 amended In the Schedule 1 heading, replace “s 58” with “s 238A”.
In Schedule 1, heading to clause 1, delete “into solvency 25 standards”.

In Schedule 1, clauses 1(1) and (2)(b), 2(1) and (2), 3(1)(a), (2), and (3), 4, 5, 6(1) and (3), and 7, and 8(1) and (2), replace “solvency standard” with “specified instrument” in each place.

In Schedule 1, clause 1(2)(a), replace “solvency standard is 30 issued” with “specified instrument is issued or made”.
In Schedule 1, after clause 1(2), insert: In this schedule, specified instrument means an instrument to which section 238A applies.” In Schedule 1, clauses 3(2), 4, and 5, replace “the standard” 35 with “the instrument” in each place.

“(4) 17 (1) (2) (3) (4) (5) “(3) (6) 8 Insurance (Prudential Supervision) Amendment Bill Part 2 Amendments to Reserve Bank of New Zealand Act 1989 18 Principal Act Sections 19 and 20 amend the Reserve Bank of New 5 Zealand Act 1989 (the principal Act).
19 Section 69 amended (Register) After section 69(2), insert: “(2A) The register may must include— “(a) “(b) “(c) the name of each registered bank; and the current rating of each registered bank under section 80 (if any); and any other prescribed information.” 10 20 Section 173 amended (Regulations) After section 173(f), insert: “(fa) prescribing information for the purposes of section 15 69(2A)(c):”.
Legislative history 6 November 2012 8 May 2013 Introduction (Bill 80–1) First reading and referral to Finance and Expenditure Committee 12 Published under the authority of the House of Representatives—2013 Wellington, New Zealand: 9