The Reserve Bank of New Zealand (RBNZ) – Te Pūtea Matua has released an exposure draft of legislation to amend the Insurance (Prudential Supervision) Act 2010 (IPSA) and opened a 12‑week consultation on the proposals. Consultation on the draft Bill runs until July 7. The legislation is currently expected to be introduced to the House of Representatives in 2027, subject to the government’s legislative programme and feedback received during the consultation.
The draft sets out in detail how Cabinet’s earlier IPSA policy decisions would be reflected in primary legislation, with direct implications for insurers, reinsurers, and groups with New Zealand insurance operations. RBNZ director of prudential policy Jess Rowe said the central bank is looking for technical input from industry and other stakeholders. “We’re seeking technical feedback on the bill to help ensure the changes work in practice and deliver the policy decisions made by Cabinet last year. It will also help us identify and avoid unintended consequences and regulatory gaps. Insurance plays a key role in many of New Zealanders’ biggest financial decisions. That’s why a sound and efficient insurance sector matters to everyone, and New Zealanders need to have confidence in the sector,” Rowe said.
In an insights article, law firm MinterEllison noted that the IPSA review began in 2016 and has involved several consultation stages, including the omnibus consultation released in September 2023. The exposure draft now sets out the proposed statutory framework the RBNZ would use for insurance prudential supervision. Under the draft bill, the current regime would be reshaped to give the RBNZ more clearly specified powers, capital intervention points, and enforcement options. The changes are intended to support a more intensive and risk‑sensitive approach to supervision.
IPSA’s purposes and principles would be updated to introduce two additional principles: proportionality in regulation and an obligation to take account of relevant international standards and guidance. The RBNZ would be required to publish a proportionality framework explaining how it applies requirements to different sizes and types of insurers.
All New Zealand‑incorporated insurers would be required to hold an IPSA licence, regardless of the location of policyholders. Licensing would be removed for specified overseas captive insurers and for overseas entities that only provide reinsurance to New Zealand insurers. Larger overseas insurers operating in New Zealand through branches could be required to incorporate locally once they meet defined thresholds, and non‑operating holding companies of insurers would become subject to a new licensing regime to support group‑wide supervision.
The existing single solvency margin would be replaced with a two‑tier solvency framework based on a Prescribed Capital Requirement (PCR) and a Minimum Capital Requirement (MCR). These control levels would underpin a “ladder of intervention,” giving the RBNZ an explicit basis to escalate supervisory responses as an insurer’s capital position weakens.
The bill would provide a more extensive statutory power for the RBNZ to issue enforceable prudential standards. Standards could cover governance, risk management, data and disclosure, outsourcing, related‑party and group exposures, actuarial advice, and planning for financial distress.
Fit and proper requirements would be extended to the chief risk officer role. Directors and all key “relevant officers” – the CEO, CFO, CRO, and appointed actuaries – would require RBNZ pre‑approval, and insurers would be required to notify the RBNZ if concerns arise regarding an individual’s fitness or propriety.
Transaction approval processes for transfers, amalgamations and changes of control involving insurers would be consolidated into a single regime, replacing multiple separate pathways.
The RBNZ would gain power to conduct on‑site inspections, including on a no‑notice basis, and access to a wider set of enforcement measures. These would include civil pecuniary penalties, remediation notices, and the option to require publication of RBNZ warnings. Directors and branch chief executives would be subject to a new due diligence duty in relation to prudential compliance.
Statutory management provisions and related tools would be updated, with a stated focus on policyholder outcomes and the public interest. The bill would also require the RBNZ to consult the Financial Markets Authority (FMA) when considering significant transactions and when issuing or cancelling licences.
Rowe said the bill “will support the Reserve Bank to be a more transparent, risk-based, and proactive regulator.” She added: “A strong regulatory environment must be both sound and efficient. The bill introduces a proportionality principle into IPSA, requiring us to publish a framework showing how regulation is tailored to the size and nature of different insurers. This complements existing Reserve Bank obligations, including considering the impact of our decisions on competition in the insurance sector.”
Legal commentary has compared the proposed IPSA settings with established prudential regimes in Europe and Australia, noting similarities in the use of two solvency control levels and in the emphasis on governance and risk management through enforceable standards. MinterEllison said the RBNZ’s package “represent a clear move towards aligning the New Zealand regime with international best practice, especially the principles embedded in the European Union’s Solvency II directive.” The firm also pointed to expected alignment with the Australian Prudential Regulation Authority’s (APRA) solvency and standards framework.
The exposure draft provides the basis for assessing how the new legislative structure would interact with capital planning, group structures, governance arrangements, and cross‑border business models. The content and calibration of future prudential standards, and the way the proportionality framework is applied, are likely to be central to the compliance impact of the reforms. Industry submissions on the exposure draft are expected to inform the final wording of the bill before its introduction to Parliament and to shape subsequent secondary regulation under the revised IPSA regime.
