Cunliffe David: Insurance (Prudential Supervision) Bill — Second Reading 
Cunliffe David: Insurance (Prudential Supervision) Bill — Second Reading 
[Volume:665;Page:12859] 
Hon DAVID CUNLIFFE (Labour—New Lynn) 
: 
 I rise to commend the Insurance (Prudential Supervision) Bill to the House in its second reading and to support in large part the comments of the Minister of Finance who has just resumed his seat. I note that there is bipartisan support for this bill that the genesis of the bill lay with the previous Labour administration and that its execution and implementation have been carried on with thoroughness and efficiency by officials of the Reserve Bank of New Zealand under the stewardship of the current Government. I commend the Finance and Expenditure Committee its chairman Mr Craig Foss its members on all sides and the officials who have supported it. I also commend the insurance industry which I believe has taken a broad and national interest - based view on the very serious matters that are the subject of this bill. 
I reflect upon the fact that the context for the genesis of this bill was a series of extraordinary events that brought the world economy itself to the brink of a depression unprecedented since the 1930s. In October of 2008 on a day I will never forget we received news that Lehman Brothers the American investment bank had collapsed. Lehman Brothers was at the heart of the New York financial infrastructure so world credit markets froze. In the weeks and months that followed the Reserve Bank of New Zealand rose to probably its toughest challenge and it did so with grace and rigour. It was not many months later that the world’s largest insurer IAG Group sought a bail-out by the US administration. The world was advised that there was a real prospect that global credit card payment systems would be suspended and that every New Zealander would have— 
Craig Foss 
: AIG. 
Hon DAVID CUNLIFFE 
: Thank you—AIG; I have “acronym-itis” and I thank my colleague for the correction. 
Every New Zealander who had a credit card would have noted the situation and would have felt the disruption that that caused. So we have a bill here that sets about bringing the insurance industry and the re-insurance industry within the prudential supervision purview of the Reserve Bank of New Zealand. In doing so the bill further underscores the importance of New Zealand having what is known as a “full service” Reserve Bank one that is responsible for both the conduct of monetary policy and the supervision of the printing issuance of currency and also for the integrity of financial markets in noting that financial stability is so much more than simply price stability. 
That brings me to the key provisions of the bill. We will debate these provisions in the Committee stage in more detail so I will not go through them now other than to single out the issue that was of most concern to the committee which was the treatment of overseas insurers operating in New Zealand. When I reread some of the language in these notes I believe that some clarification is merited. The committee wrestled with the issue of whether New Zealand - based insurers would be disadvantaged by the provisions of this bill which allows the Reserve Bank to grandparent foreign mainly Australian-based insurers into the New Zealand market. We spent hours discussing and receiving evidence on whether New Zealand - based insurers—and I can say publicly that AMI is the key example there—would be disadvantaged. On balance the committee was reassured by officials that there would be no such disadvantage in the way in which this legislation was implemented. But I do want to lay down a very serious marker which is that the Labour Opposition will remain vigilant on that matter and that the sovereignty and strength of the New Zealand financial markets is a matter of the highest national importance. We have a continuous bleed on our external accounts because most of our financial systems are overseas-owned and we must not hollow that out. 
Let me come to the second major theme that I wish to advance today—that is that the extension of prudential supervision to the insurance sector has clearly required legislation. It is also appropriate that the extension of the current Reserve Bank role to macro-prudential supervision of the monetary system and the counter-cyclical use of macro-prudential policy should have legislative amendment akin to this bill. The counter-cyclical use of a prudential policy to achieve monetary policy objectives is not provided for explicitly in the Reserve Bank of New Zealand Act as it currently stands. It is not provided explicitly in that Act as it currently stands. The Reserve Bank is interpreting the Act as being broad enough to accommodate both roles. The Labour Opposition as part of its extensive review of monetary policy recommends— 
Mr DEPUTY SPEAKER 
: We have a speaker on his feet speaking and there is a cross-dialogue going on here that has nothing to do with the debate. 
Hon DAVID CUNLIFFE 
: It is a matter of great regret that given the seriousness of the financial issues that surround our economy this matter of the extension of the Reserve Bank of New Zealand Act into macro-prudential policy has not yet been accommodated. 
A third theme that I wish to advance today is that ensuring the integrity of insurers goes to the heart of our financial system. The insurance industry requires public confidence just as the institutions of Government more broadly require public confidence. That is why we have a  
Cabinet Manual 
 that is why we have the Standing Orders and that is why we require Prime Ministers to enforce the provisions of the  
Cabinet Manual  
for all Ministers. If they do not do so the public has no insurance that those who operate to supervise their markets and their country are acting with integrity. It is a matter of great sadness and some concern that the public of New Zealand— 
Paul Quinn 
: The events of this afternoon? 
Hon DAVID CUNLIFFE 
: Mr Quinn would do well to note that the public of New Zealand hold politicians to be less trustworthy than prostitutes. This matter is a matter of grave concern. The member may laugh but on a day when it has been revealed that New Zealand’s Minister of Trade has used information found during his conduct of ministerial duties to enrich himself through the shadowy operation of a private trust and has failed to declare that publicly that is a matter of concern because it corrodes the integrity of the Government and of this House. I wonder why the Prime Minister of New Zealand has lowered the standards of ministerial accountability—standards that are so far lower than those that patently apply in the New Zealand Labour Party—because Ministers in this Government are allowed to enrich their private interests when on public business; they are allowed to buy and trade shares— 
Craig Foss 
: Point of order— 
Mr DEPUTY SPEAKER 
: We are getting into the territory of accusing a member of points that are not part of this debate. I ask the member to withdraw that comment and to proceed. 
Hon DAVID CUNLIFFE 
: I withdraw the comment made in relation to any particular member but I trust that you Mr Deputy Speaker will not require me to withdraw the sentiment that ensuring the integrity of our political institutions including our Cabinet is a matter of the highest national importance. In that regard it has to be regretted when a Prime Minister lowers those standards of accountability. The Minister of Finance might smirk about that matter because he has been on the receiving end of that leniency on several occasions and other members might find themselves in need of such leniency but the net effect for this country is that the public’s esteem of the Government will fall further. How can the public be sure that when a Minister is gaining information about markets the information will be used for the public interest and not the private interest?