Foss Craig: Insurance (Prudential Supervision) Bill — In Committee Third Reading 
Foss Craig: Insurance (Prudential Supervision) Bill — In Committee Third Reading 
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CRAIG FOSS (National—Tukituki) 
: 
 Well that speech from Stuart Nash was the best indication that voodoo economics is on the way back. The platform of the Labour Party at the next election will be monetary policy apparently. Its platform will not be tax cuts affordability the cost of living climate change or jobs; its policy going around the traps will be monetary policy. 
I look forward to seeing Mr Raymond Huo Mr Choudhary etc. going around the traps and talking about monetary policy. At every meeting we will furnish our candidates and MPs with the report of the inquiry into future monetary policy which was started and completed under the previous Government at the whim of Dr Cullen and the Labour members on the Finance and Expenditure Committee what was it 2 years ago? In September 2008 I think that report was presented to the House. 
Hon Member 
: I thought this bill was about insurance. 
CRAIG FOSS 
: It was very interesting because the terms of reference of that inquiry—I am just replying to Stuart Nash the previous speaker—were agreed to and formulated by the National members including me on the Finance and Expenditure Committee and members of the previous administration. As two other speakers have already brought this debate into the realm of monetary policy for some reason— 
The CHAIRPERSON (Eric Roy) 
: It was my error to allow the previous speaker Stuart Nash a second call. I regret that but that does not mean—[ 
Interruption 
] That member can go outside for half an hour. I am on my feet; I mean that. That does not give any other member the opportunity to move the debate away from the bill. We are on the Insurance (Prudential Supervision) Bill. Members will speak to the bill in the Committee stage. 
Paul Quinn withdrew from the Chamber. 
CRAIG FOSS 
: Thank you Mr Chairman; I totally agree with you—I reiterate that the Insurance (Prudential Supervision) Bill falls under the ambit of the Reserve Bank. I make one qualification: the bill has nothing whatsoever to do with the Reserve Bank of New Zealand Act as some members have indicated although the Reserve Bank sponsored the bill and its officials helped the Finance and Expenditure Committee during the bill’s select committee process. As we are now in the Committee of the whole House it is appropriate that the officials are in the Chamber to assist the Minister and the Committee of the whole House where necessary. 
It is very pertinent to not confuse this Insurance (Prudential Supervision) Bill with any type of regulation to do with finance companies. I think I am correct in saying that not one cent has been lost within New Zealand or even in the United States from memory from collapses of insurance companies. Attention has been focused on the need for this type of supervision and for a more generic approach to all things financial. But Mr Chairman is quite right to say that bringing the debate into the realm of finance companies in Lower Hutt or somewhere has absolutely nothing to do with insurance. I reiterate that I do not believe that even one cent has been lost by New Zealanders from their funds held by insurance companies in New Zealand. 
This bill is a preventive measure and it is quite a prudent measure—the word “prudential” is in the bill’s title. Prevention is better than cure. This bill is a recognition that in modern finance where funds in finance companies and companies in the insurance industry are exposed or where there is any cross-pollination or exposure of each other’s funds it is good to have the same regulator at the top of the tree keeping an eye on everything. There are some common themes between how this bill works and how banking supervision works. Even though some of the funds involved are ring-fenced in many aspects their supervision needs strengthening. Many of these funds are quite substantial and they dwarf the funds in some of the institutions that members opposite were speaking about in those two earlier speeches. 
As tempting as it is to discuss that matter—and I note Mr Chairman’s comment earlier about sticking quite narrowly to the bill but goodness gracious me—I look forward I suppose to hearing further speeches from members opposite to counter some of the comments made. However I agree with Mr Chairman’s ruling that the previous speaker went outside the scope of the debate. Basically my assertion is that those members were totally wrong. That those members are putting monetary and fiscal policy into one bucket and giving it to the Reserve Bank—which is kind of what I heard—is very interesting indeed. 
The Finance and Expenditure Committee had 57-odd submissions on this bill. I acknowledge the process the officials who were involved and the members of the committee. I realise that members opposite are voting for this bill and once we got to the nitty-gritty there was only one point of real interest or angst perhaps in the bill for one or two select committee members. I recall them speaking about that point in the second reading debate. 
We opened for submissions on 8 December 2009 and closed on 10 February 2010. The point is that there was ongoing consultation. There was the normal process of a bill coming to the committee and then the committee opening it up for public submissions particularly from those who had not been involved in any process pre-consultation or discussions with the Reserve Bank or whoever might be running the bill. If it were a tax bill the discussions would have been with Inland Revenue Department officials. Really parallel conversations were going on. That was the correct process because the committee was totally informed as to who was involved in those discussions what material or policy changes had been made and which strong debates discussions or areas of disagreement there still were. 
Efficiency in the public sector if you like took one great leap forward in so far as this bill was concerned because it is quite substantive. If we look at just some of the background documents and some of the organisations that were involved we see overall that only one particular sector was not as happy at the outcome as others and that sector was the captive insurance industry. To its credit it made its case very very strongly. But I made the point in the committee I think that the control missing from some of those arguments was in trying to quantify the risk to New Zealand and to our reputation and aspirations as a First World financial centre if we were to be included in the same group as the Cayman Islands Jersey Guernsey and various other places like that. That would be a deliberate choice for New Zealand. On balance I am quite confident that we made the right choice. 
The committee made some substantive changes. Initially we had quite interesting discussions and debate about what insurance was in fact. We talked about whether insurance was discretionary. Members would not believe how many organisations that discussion picked up. Even if someone contributes to a fund a trust or a friendly society the key point was whether that person would have discretion on payout. Some professional bodies were included in that discussion including some Wellington organisations like the Loyal Britannia Lodge from memory. All sorts of interesting things came out of that discussion. These were organisations where fund members had put in a few dollars every week for their funeral costs intending that fund to mature in 10 20 or 30 years or whenever it might be. Originally those organisations were picked up by this bill. It is a credit to the select committee process and the Reserve Bank officials that those organisations were carved out. I think we put the cap at $1.5 million or was it $3 million? But basically there was no mischief whatsoever. The risk to the insurance part of the New Zealand financial system was very very small in so far as those bodies were concerned. 
As it turned out there were two or three types of groups. There were the very small groups. There were professional bodies such as those that offer some medical insurance veterinary insurance or dental insurance. Then there were the larger players whom we all know about such as AMI Insurance and the big-end-of-town insurance companies. Overall I still attest that on the whole they were generally comfortable. There was some detail that they were not comfortable with and some are still not very happy but all the rhetoric and allegations around this bill have quietened down quite massively. Some of the allegations about there being an increase in premiums because of this bill etc. have not come to pass because those who made the allegations were being a wee bit facetious. They had built in those premiums and made changes anyway because of other changes to the taxation treatment of the life insurance side of their businesses and the normal insurance side of the business. One side is the balloon side and the other side is the user-pays “pay as you go” - type stuff. 
One point I will raise is that other members had concerns about the impact on the balance sheets of large New Zealand insurance companies. As I said in my speech in the second reading debate that concern has been flagged for quite some time. I cannot quite remember when the bill was first introduced to the House but there have been discussions on it for quite some time. With regard to the effect of the bill having an impact on insurance companies’ balance sheets I say it will be something like 3 or 4 years all up from the first discussion of this measure to when those companies must comply. There have been allegations as to the cost for some of the policyholders trust holders or unit holders if you like for those institutions. Actually—and this came into the discussion of New Zealand regulation versus Australian regulation—after 3 or 4 years of lead time a balance sheet moves around and investment decisions are made. Some companies make those decisions based on regulatory arbitrage perhaps and others make them based on tax arbitrage. 
This is a very good bill. I acknowledge the Opposition for supporting it. Thank you.