Adams Amy: Insurance (Prudential Supervision) Bill — First Reading 
Adams Amy: Insurance (Prudential Supervision) Bill — First Reading 
[Volume:659;Page:8322] 
AMY ADAMS (National—Selwyn) 
: 
 It is my pleasure to also contribute to this first reading debate on the Insurance (Prudential Supervision) Bill. A number of themes have come through quite strongly in the debate this afternoon. One of those has been the fact that over the last 18 months or so the world has changed and one thing that has become clear to us all is the importance of trust and confidence in our banking and financial sectors. Certainly although New Zealand has not escaped the recession unscathed it has done considerably better than many other countries in the world. In large part that has been because our banking sector has been much stronger than that of many other countries we have seen. If anything was needed to bring home to us the importance of that it has been not only the relative success of the banking sector but also the complete failure of trust we have seen through the non-bank lending sector and the finance company failures that have hurt and terribly scarred so many New Zealanders. 
Those wider issues really do set a context for what we are dealing with here with prudential supervision of the insurance sector because that sector also plays its role in the financial security of all New Zealanders. Through this bill the House looks to bring a lot of outdated and disjointed legislation together into a cohesive prudential set of regulations that will ensure New Zealanders can have the same high level of trust and confidence in the insurance sector that we would want them to have in all aspects of the financial markets. 
This bill will set up a system whereby the Reserve Bank is both the regulator and the supervisor of all insurers in New Zealand. It will cover all types of insurance such as life non-life and medical. One of the important aspects of it is to ensure that New Zealand does not become seen by international jurisdictions as a soft option with a loose regulatory framework around insurance and this bill has been very careful to benchmark our rules with comparable international equivalents to make sure that that is not the case. The bill talks about a number of requirements on the insurers such as financial strength ratings satisfactory fit and proper risk management programmes and risk-based capital and solvency requirements all of which are quite familiar themes to those of us who have been looking at prudential supervision in other areas. 
Interestingly I note in the bill that although the Reserve Bank has a supervisory role it is a reasonably light-handed approach. The regulations require the insurers to take ownership for themselves and exercise self-administration and self-discipline. Certainly it will be interesting when we go through the select committee process to explore that further to look at the risks involved and to examine with the Reserve Bank the pitfalls and benefits of that approach. It is a more light-handed regulatory system. We do not want to put onerous costs on the industry but we do want to ensure that New Zealand has an insurance sector that New Zealanders can have confidence in. I commend the bill to the House.