Young Jonathan: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — In CommitteeText is incorporated into the Bound VolumeYoung Jonathan: Accident Compensation (Financial Responsibility and Transparency) Amendment Bill — In Committee[Sitting date: 22 September 2015. Volume:709;Page:6839. Text is incorporated into the Bound Volume.]JONATHAN YOUNG (National—New Plymouth): After hearing a number of contributions I thought I must stand and talk about why words such as “should” are there.Iain Lees-Galloway: Is it in the public interest?JONATHAN YOUNG: Indeed it is in the public interest I am sure. As I come to just make some comments on the principles of financial responsibility—particularly the third principle which provides that large changes in levies are to be avoided. This is intended as a safeguard to produce some certainty for levy payers.It is no surprise—and I hope the members on the other side know this—that when a bill goes to a select committee it often comes out changed. You understand that. It is not dire conspiracy; it is actually listening to stakeholders and people in our community.We consider their view we look at what the legislation proposes and we ask ourselves whether what went into the committee is actually fit for purpose after hearing submissions.This is what the Insurance Council of New Zealand said: “Clause 166A(c) states that ‘large changes to the levy must be avoided’. While it is desirable to avoid volatility of levies there will inevitably be occasions during the life of the scheme when extreme events occur.”—and of course this sectorthe insurance sector understands this better than anybody—“In the general insurance sector the period 2010-2012 saw some of the most expensive insured claims globally as a result of the massive flooding in South East Asia the Canterbury earthquake series the Tohuku tsunami and Hurricane Sandy to name a few catastrophes. The result was a sharp rise in reinsurance costs globally which saw a significant increase in premiums to consumers in New Zealand. It is quite conceivable that another global financial crisis would have a major impact on the ACC’s investments. ACC should be able to respond to such extreme circumstances.”That is one of the reasons why “must” was changed to “should” at the recommendation of a number of substantial submitters through the select committee process—one or two but substantial submitters. The Insurance Council of New Zealand you would have to say is a substantial submitter. It was not the only one. So what it does is it enables a degree of flexibility.We also know that retaining section 300 is consistent with this approach and it means that in making decisions on levies the Minister will also have regard to the public interest—in particular the interests of taxpayers levy payers claimants and potential claimants in the future. We want an accident compensation scheme that is here for decades and decades and decades to come so sustainability solvency and predictability around this are incredibly important. So this serves as a safety valve—for example in circumstances where there are concerns about the impact on levy payers of raising levies.During the global financial crisis ACC recommended far more levy increases than Cabinet signed off on—and here we are fully funded. We also know as do members on the other side that the fully funded figure as ACC reported to us at the beginning of this year was higher than the 100 to 110 percent but we also know that it reported to us that in January of this year a $4 billion loss happened to the asset base of ACC which in February was recovered by $2 billion. So there is a degree of volatility. So that percentage in terms of the solvency of that account drastically changed.What this bill is essentially about is smoothing out the peaks and the troughs as best as we possibly can in a very volatile environment where we do not know year by year how many claims we will receive. We know for example as the Insurance Council has said that globally there can be very high claims in the insurance sector certainly in the ACC sector when accidents occur—and let us hope they do not happen at an accelerated or larger proportion than what is estimated—and they become higher-level claims. So having the strength of a resource base an asset base that can be evened out to take those highs and lows is very important. Having a process of transparency around that instead of making adjustments at the very end in terms of levy setting and having a policy statement at the beginning that brings guidance through this whole process is very very important.I do hope that those few comments I have made around that word “should” actually brings some context and some understanding of what that word is about. Thank you.