Adams Amy: Insurance (Prudential Supervision) Bill — Second Reading 
Adams Amy: Insurance (Prudential Supervision) Bill — Second Reading 
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AMY ADAMS (National—Selwyn) 
: 
 It is a great pleasure to take a call in the second reading debate on the Insurance (Prudential Supervision) Bill. As has been mentioned this bill spent some time at the Finance and Expenditure Committee which is ably chaired by my friend and colleague Craig Foss. He did an excellent job of shepherding a very difficult bill through the committee. It was a bill that the committee worked very well on certainly very cohesively and with one purpose in mind and that was to ensure that we got the best legislation we could get in this important area. 
In my first reading contribution on this bill I spoke about the importance of trust and confidence in our financial sector. I think that given the years just behind us—not only in New Zealand but also in the world—everyone is very aware of the importance of that trust and confidence and how easily it can be damaged and also the damage that can be done when confidence and trust fall. We have seen all sorts of examples even in more recent times of what happens when there is no confidence in our very important financial sector. Insurance is an important part of that. When we have been looking at reform of the financial sector a lot of the focus has been on finance companies and the like but in this legislation we are focusing on the insurance sector. It covers life medical non-life and as my friend Mr Garrett talked about employment protection insurance for people who suddenly find themselves in a less secure employment position than they might have been at the start of the day. 
This is a strong regime and an important regime. The committee had to get a balance ensuring that the response was enough to protect New Zealanders who rely on the financial sector and the insurance sector and ensuring that it was not overly onerous for companies and did not go any further in terms of red tape and bureaucracy than we needed to go. That is where a lot of the committee’s work was focused. 
As we have heard the bill requires the licensing of all applicable insurers. A big part of our work was determining who should fall outside that catchment. We spent a bit of time talking about overseas insurers and to what extent the bill should cover them. The decision was that it should not apply to anyone not carrying out business in New Zealand. The two exemptions I want to briefly touch on in this contribution are the exclusions we recommended for trade associations and other professional associations that offer discretionary voluntary insurance benefits as part of their work. I think it is important that we are careful we do not bring into the ambit of a bill like this any organisation that was not intended to be caught. Clearly the mischief we are trying to deal with in this legislation is those organisations in the insurance sector proper not those that offer some discretionary membership benefits and are not really in the nature of a pure insurance company as we would think of it. We recommended that some work be done on excluding those associations from the bill. 
We also spent time thinking about small insurers and ensuring that we do not apply overly onerous requirements to them particularly around some of the solvency requirements of the bill and the financial strength ratings. Existing insurers will have the ability to be exempt if their gross annual premium income is over a figure that will be set; we are thinking it will be in the region of $1 million to $1.5 million of gross premiums a year. Existing insurers in that category will be able to be exempt from the bill but as I said not all of the conditions of the bill—primarily financial strength ratings some of the capital adequacy requirements and some of the solvency requirements. I think that is an important part of the bill. As I said we do not want to be unduly onerous on small insurers who are in business and are carrying on their work adequately and who certainly were not expecting this when they set up their business model. 
Those are the two exemptions I wanted to touch on in this contribution; I know that other members will address other parts of the bill. I think the committee can be rightly proud of the work it has done. Certainly it is not an easy area; it is a complex one. Under the careful chairmanship of Craig Foss I am very happy with where the bill has come to. Thank you.