The Insurance (Prudential Supervision) Act 2010 (IPSA) review

15 September 2021

Current status

On 1 October 2020, the Reserve Bank of New Zealand (Reserve Bank) formally relaunched its review of the Insurance (Prudential Supervision) Act 2010 (IPSA) by publishing a relaunch paper, following an earlier announcement on 14 September 2020 that the Reserve Bank had decided to resume the review.

On 31 August 2021, the Reserve Bank announced a public consultation on whether the current legislation gives policyholders the protection that they expect and published an accompanying options paper.  We set out more information on this consultation below.  The deadline for submissions on this consultation is 15 November 2021.

We will regularly update this page with developments on the IPSA review.

If you would like assistance with making a submission or advice in relation to the IPSA review, please contact a member of our financial services regulation team.


IPSA was enacted in 2010, providing the first comprehensive framework for the prudential regulation and supervision of entities carrying on insurance business in New Zealand.

IPSA introduced a requirement for insurance providers to be licensed, with the licensing process introduced by the Reserve Bank in 2013.  Licensed insurers must comply with IPSA, the terms of their license and various secondary regulatory instruments administered by the Reserve Bank such as the 'Fit and Proper Standards' and 'Solvency Standards'.  The Reserve Bank also has distress management powers under IPSA.

Phase 1

Terms of Reference

In April 2016, the Reserve Bank released the Terms of Reference for a review of IPSA (IPSA Review), announcing its intention to review IPSA over 2016-2017.

The Reserve Bank stated that the legislative purpose of IPSA remained appropriate (maintaining a sound and efficient insurance sector and promoting public confidence in the insurance sector).  The aims of the IPSA Review included, amongst others, identifying opportunities to reduce administrative costs caused by the fragmentation of requirements across regulatory instruments, create tools to deal with a diversity of business models in the sector and ensure overseas based insurers were appropriately regulated.

The IPSA Review has been split into two phases:

  • Phase 1 was completed in October 2017.  The first phase of the IPSA Review has targeted the identification of potential issues for the Reserve Bank to consider in more detail during Phase 2 of the IPSA Review.
  • Phase 2 is underway.  Phase 2 will involve the Reserve Bank considering and responding to the points raised by stakeholders and the 2017 report prepared by the International Monetary Fund on New Zealand's insurance sector (discussed in more detail below). Other developments that will provide material for consideration in the IPSA Review include the FMA/RBNZ Thematic Review of Life Insurer Conduct and Culture and the Thematic Review of the Appointed Actuary regime.
Issues Paper and Stakeholder Forum

On 30 March 2017, the Reserve Bank released an Issues Paper setting out the rationale of the IPSA Review, the intended process for the review and a range of potential issues identified.  On 13 April 2017, the Reserve Bank hosted stakeholder discussion forums in Auckland and Wellington to provide an opportunity for stakeholders to discuss the Issues Paper and the review in general.

The Reserve Bank sought written submissions during a consultation period lasting from 30 March 2017 to 30 June 2017.  The Reserve Bank received 42 submissions and, on 17 October 2017, released a feedback statement on the submissions.

International Monetary Fund Report

In April 2016, the International Monetary Fund (IMF) announced that it would undertake a comprehensive review of New Zealand’s financial system as part of its Financial Sector Assessment Programme (FSAP).

In May 2017, IMF released its FSAP findings and report as well as individual FSAP reports on a variety of relevant topics and sectors, in particular a report on the insurance sector (the IMF Report).  The IMF Report is a detailed assessment of New Zealand’s regime, benchmarked against the 'Insurance Core Principles' issued by the International Association of Insurance Supervisors.

The Reserve Bank stated that it would consider the IMF Report as part of its IPSA Review.  The IMF Report on the insurance sector noted that the decision to regulate New Zealand's insurance sector was based on the recommendations of a working group established in 2005, partly in response to one of the recommendations from the 2003–2004 New Zealand FSAP.

For all documentation produced during Phase 1 of the IPSA Review, please see the Reserve Bank's IPSA Review page.

Phase 2

The feedback statement released by the Reserve Bank on 17 October 2017 set out an indicative timetable for Phase 2 of the IPSA Review, indicating an approximate 21 month period beginning in October 2017 and ending in mid-2019 before the Reserve Bank would be ready to publish a final 'Options Paper'.  This timetable included provision for three rounds of consultation.

However, following a prioritisation exercise, the Reserve Bank had initially suspended the review in April 2018 with the intention that the decision would be considered quarterly, and the review be resumed in due course.  The Reserve Bank relaunched the IPSA Review on 14 September 2020.

The Reserve Bank intended to release an initial overview policy paper in October 2020 and release subsequent consultation papers on various components of the review during 2021 to 2023.  The Reserve Bank envisages a staggered implementation of changes, from easily implementable operational changes to legislative changes. The Reserve Bank's estimated completion date is 2024.

Relaunch paper

On 1 October 2020, the Reserve Bank published a relaunch paper formally relaunching the IPSA Review and setting out its planned approach and timeline for the remainder of the IPSA Review.  The relaunch paper provided an updated overview explaining the objectives, topics to be covered and an indicative timetable for the IPSA Review.  This relaunch paper was for information purposes only and the Reserve Bank did not seek comment on this paper.

Consultation papers – IPSA Review

On 30 November 2020, the Reserve Bank published an initial, substantive consultation paper on the scope of IPSA and its treatment of overseas insurers.  Submissions closed on 18 February 2021.

This consultation paper is the first of five consultations on various aspects of New Zealand's insurance regulation.  The consultations will take place between 2020-2022 with new legislation expected in 2023-2024.  This consultation considers the following key issues:

  • Scope of the IPSA - whether the definitions of "contracts of insurance" and "carrying on business in New Zealand" are sufficiently broad and capture all businesses that should be captured by IPSA
  • Branches of overseas insurers - whether the rules for licensed overseas insurers who do business in New Zealand are appropriate, particularly the exemptions regime which relies on regulation imposed by these insurers' home countries
  • Overseas reinsurance - whether reinsurance should be treated differently to overseas insurance
  • Group supervision and outsourcing - how entities' corporate and legal forms affects the way regulations takes effect, in particular, discussing whether specific rules overseeing interactions between members of a corporate group and governing outsourcing policies and practices should be a part of the IPSA.

The Reserve Bank also published an accompanying, non-technical summary of the consultation paper.

On 22 July 2021, the Reserve Bank published a public feedback statement on the November 2020 consultation paper on the scope of the IPSA and the treatment of overseas insurers, together with the Reserve Bank's responses to the public submissions received and a document containing full submissions.

On 31 August 2021, the Reserve Bank published a second, substantive consultation paper on a range of issues relating to policyholder security.  The deadline for submissions on this consultation paper is 15 November 2021.

The objective of this consultation paper is to "increase the likelihood that policyholders will receive the payments they are entitled to if they need to make a claim on their insurance policy".  This consultation paper provides an overview of the current approach to policyholder security and considers the following key issues:

  • Financial strength disclosures - the aim is to "provide independent and standardised information on the relative financial strength of the insurer to consumers, policyholders and potential investors", noting that the current disclosure obligations imposed by IPSA only relate to financial information and may be insufficient in their scope
  • The way solvency standards are operationalised in IPSA - this consultation paper is not concerned with how much capital insurers should hold and how that amount is calculated as that is part of a separate review (set out below). Rather, the paper focuses on provisions that empower and apply the solvency standards such as whether it would be preferable to measure compliance by degree of compliance rather than the current approach which simply deems insurers either compliant or non-complaint.
  • Termination values - the consultation queries whether IPSA should set out rules for working out the amount that policyholders are owed if insurance contracts are terminated early. This is relevant to certain types of insurance, such as life insurance, where a policyholder hasn't made a claim but has contributed funds that are being held by the insurer.
  • Statutory funds - under the current IPSA regime, life insurers are required to establish ‘statutory funds’ to look after the assets that underpin their liabilities to their life insurance policyholders. A statutory fund is a fund that is established in the records of a life insurer; and relates solely to the life insurance business of the life insurer or a particular part of that business.  A statutory fund ring-fences life insurance assets from the remainder of an insurer's business and protect policyholders from the insurer's insolvency. The consultation sets out several queries related to statutory funds, in particular querying whether other types of insurance contracts should also have assets held in statutory funds and whether some protections that statutory funds offer policyholders should be extended to other policyholders.
Consultation papers - solvency standards

On 1 October 2020, the Reserve Bank also launched its review of solvency standards under the IPSA and published a launch paper on the principles intended to guide the review.  Submissions on the launch paper closed on 12 November 2020.

Solvency standards are the rules that calculate the amount of capital an insurer is required to hold in order to, amongst other things,  protect against costs from unforeseen events.  The solvency standards are issued under section 55 of IPSA - one or more solvency standards may apply to a licensed insurer under the licensed insurer's conditions of licence.

The Reserve Bank last consulted on the solvency standards in 2018, in response to the introduction of the accounting standard NZ IFRS 16.  The over-arching consideration for the review of solvency standards will be an assessment of the impact of the introduction of IFRS 17.  IFRS 17 is the new international financial reporting standard that, by 1 January 2023, will replace the existing IFRS 4 standards on accounting for insurance contracts.

On 30 November 2020, the Reserve Bank published a second, substantive consultation paper on the structure of solvency standards and its response to IFRS 17. Submissions closed on 18 February 2021.  The Reserve Bank also published an accompanying, non-technical summary of the second consultation paper.

On 22 July 2021, the Reserve Bank published a public feedback statement on the November 2020 consultation paper on the structure of the solvency standards and IFRS 17, together with the Reserve Bank's responses to the public submissions received and a document containing full submissions.

Consultation paper - interim solvency standards

On 22 July 2021, the Reserve Bank published draft interim solvency standards (ISS).  Stakeholders may make submissions on the draft ISS until 1 October 2021.  The draft ISS are intended to take effect in early 2022 and be in force for approximately three years, with the final solvency standards expected to come into force in 2024.

The explanatory note to the draft ISS sets out that the purpose of the draft ISS is to provide a standard that will work effectively once insurers have adopted IFRS 17 and to embody the core principles that will shape the final solvency standard.  The explanatory note also sets out how stakeholders may make submissions on the draft ISS until 5pm on 1 October 2021.