Foss Craig: Insurance (Prudential Supervision) Bill — Second Reading 
Foss Craig: Insurance (Prudential Supervision) Bill — Second Reading 
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CRAIG FOSS (National—Tukituki) 
: 
 I will talk to the Insurance (Prudential Supervision) Bill. I acknowledge the points made by the previous speaker the Hon David Cunliffe in the first half of his speech about the bill. I tend to agree with most of what he said about the bill. Unfortunately he went off the track a bit by talking about trust and integrity. In a hypothetical situation if someone was lurking around sending letters perhaps under the cover of darkness but was caught out by security cameras it would not look good in terms of trust and integrity. Of course there are also interesting issues of privacy etc. and in terms of how people get access to confidential information which is something that the previous member spoke about it would be interesting to also raise issues of confidential video catalogues and recordings of proceedings in various places. We should all be vigilant and we thank the member for acknowledging the point that some politicians need to be careful and constantly vigilant. It is well noted. 
I will return to the bill. First of all I thank the members of the Finance and Expenditure Committee for scrutinising the bill; the previous speaker is a member of this committee. The committee as a whole came together in respect of this bill. Quite a few changes were made to the bill some of which were more major than others. We had a very active submission process and I think we drew on the ability of those around the table and particularly of officials to get to some of the points and changes that we have made. I acknowledge the officials and the Reserve Bank of New Zealand which sponsored and worked on this bill. It is not very often that we get a bill—“driven” is not quite the right word—managed perhaps by the Reserve Bank itself. 
I acknowledge not only the work of the commercial sector but also the parallel process that officials went through as issues arose in ongoing consultation with the committee. That process works very well because we catch up and we do things cumulatively. As we can see from the changes to the bill this system has worked although not necessarily to the satisfaction of all submitters. Some submitters were very active in their proposals around their particular part of the sector but again as the previous speaker started to speak about there are some risks to the New Zealand financial system. I note again that this bill is called the Insurance (Prudential Supervision) Bill. Thus it relates to the insurance sector which is part of the finance sector. We need to be constantly vigilant. We are very lucky in this country that we have not had any major insurance incidents. Another member talked about an American company but that was not in respect of any insurance company failure through this process having created a problem. Some of the investment banking and highly leveraged stuff had created the problems in the first waves if you like. But the concerns are acknowledged. 
Just quickly I will mention a couple of changes that I like in particular—and I know that another member may talk to some issues as well. Of the 57-odd submissions made to the committee several were in respect of smaller entities. The industry is pretty much split into some very small players and some very large players. The very small players argued—some quite successfully—that firstly they were not really in the insurance business and secondly that they were self-contained if you like or had not done much in quite some time. So I acknowledge the Minister the officials and the committee for coming to recommendations and conclusions and for proposing the amendments that we see in the bill now. The recommendations carved out the small players and looked after them. There was no particular mischief going on in a prudential sense and of course those entities are also covered under other legislation and regulation anyway. But the larger players have been picked up by this legislation. 
Finally I will make a couple of points about the recognition of other regulatory agencies or basically other central banks. We had quite a discussion about that. I think that the point that we have got to in this bill is very helpful in respect of the commitments from the Reserve Bank as it goes through the process. We have provided greater clarity than was in the original legislation. Also I note for participants in the New Zealand insurance industry that it has been about 18 months since the first signals were given—probably longer because the previous speaker noted that this legislation started under the previous Government—of some of the changes in respect of the conservative or prudential ratios that were going to arrive for this industry. There is also a lead time once this bill is passed. There is still quite some time for balance sheet management to occur so there should not be any sudden shocks to the shareholders of those particular companies their unit holders their local shareholders or whatever they may be. 
I commend the bill to the House. I again acknowledge the ongoing hard work of the select committee. Again putting politics aside for a moment I say the way that the select committee dealt with this bill across the parties produced good public policy and a good document for New Zealand. I acknowledge the contribution of all members of the select committee as well as the contributions of the officials and the sector. Thank you.