IFA RISK MASTERCLASS

Researching Providers

Richard Dean, Reserve Bank of New Zealand

Russell Hutchinson, Chatswood Consulting Limited

1. What is the law under which appointed the Reserve Bank to supervise life companies?

2. How many insurers – of any kind – are licenses or in the process of being licensed by the Reserve Bank in New Zealand?

3. What is the main thing the Act requires an insurer to disclose to clients?

4. What is the central issue the RBNZ is considering when licensing an insurer?

5. How many do you represent?

6. Are you required to represent them all?

7. Are you required to represent all the insurers that sell a product type on which you advise?

IFA RISK MASTERCLASS

Researching Providers – Quick Quiz

• What is the law under which appointed the Reserve Bank to supervise life companies? Insurance (Prudential Supervision) Act 2010

• How many insurers – of any kind – are registered with the Reserve Bank in New Zealand? 111

• What is the main thing the Act requires an insurer to disclose to clients? A financial stability rating

• What is a central issue the RBNZ is considering when licensing an insurer? Capital adequacy

• How many insurers do you represent? Over to you…

• Are you required to represent all insurers in NZ? No

• Are you required to represent all the insurers that sell a product type on which you advise? No

IFA RISK MASTERCLASS

Researching Providers – Quick Quiz

Two stages:• Which companies / products you choose to sell• What’s suitable for the specific client’s you are advising on a given day

 Although general, your selection process may have an eye on suitability for market segments, but will tend to focus on competence, access, and evaluation of the insurer.

You may consider the following as a guide: • As many companies as you like so long as you are competent to advise on

the recommended product / areas of client requirements• As few as you like provided you are clear to consumers about the limitations

on the scope of your service

A tool to help you do this can be found at: http://www.chatswood.co.nz/moneyblog/2013/05/ifa-conference-researching-product-providers.html

IFA RISK MASTERCLASS

Stages in Selecting Insurers

Richard Dean was appointed to the role of Manager, Insurance Policy at the Reserve Bank of New Zealand in February 2008 to lead the development of a Prudential Supervision regime for the New Zealand insurance industry.

The Insurance (Prudential Supervision) Act was enacted in September 2010, bringing New Zealand into general alignment with international regulatory benchmarks.

Appointed to the new role of Manager Operational Policy in 2012, Richard’s role has expanded to now also include the Banking, Non-Bank Deposit Taking, and Payments sectors.

Prior to joining the Reserve Bank Richard had 32 years’ administrative and general management experience within the New Zealand banking and insurance sectors. He holds an MBA from Henley Management College and is a Senior Fellow of the Financial Services Institute of Australasia (FINSIA). Richard is a former president of the Insurance Institute of New Zealand and New Zealand Director of FINSIA.

IFA RISK MASTERCLASS

Richard Dean, Reserve Bank

Institute of Financial Advisers

2013 MasterClass

21 – 22 May

Insurance Regulation and Supervision in New Zealand

Richard Dean

• This presentation is not financial advice.

Insurance (Prudential Supervision) Act 2010 (IPSA)

• Purposes of IPSA- maintenance of a sound and efficient

financial sector; and- public confidence in the insurance sector

• Purposes achieved by- Licensing- Prudential requirements- Supervision- Powers for Bank to act where financial

distress

Licensing requirements

• Section 19 of the Act sets licensing requirements, including- Current financial strength rating- Solvency standards- Statutory funds- Risk management programme- Financial reporting - Appointed actuary requirements- Appropriate governance

Financial strength rating

• Licensed insurer must have current financial strength rating by approved ratings agency

Solvency standards

• Must be able to show ability to comply with solvency standards

• Minimum capital requirement

Statutory funds

• Life insurers must have a statutory fund• Ring-fences funds for policyholders

under life insurance policies

Risk management programme

• Must have risk management programme that is satisfactory to the Reserve Bank

• Includes Fit and proper policy

Appointed actuary and financial reporting

• Must have appointed actuary• Must provide the Reserve Bank with full

and half year financial accounts

What the prudential regime is and is not

• Sets minimum standards to support public confidence

• The regime places reliance on directors and the appointed actuary

• Not a zero failure regime- Bank has broad range of powers- Provides for orderly wind-down if necessary

• There is no government or Reserve Bank guarantee of insurers

www.chatswood.co.nz and www.qpresearch.co.nz about Russell Hutchinson

If you would like to download the insurance company criteria / selection tool you will find the link at:http://www.chatswood.co.nz/moneyblog/2013/05/ifa-conference-researching-product-providers.html

www.rbnz.govt.nz/finstab/insurance/ to find out more about the Insurance (Prudential Supervision) regime. For specific issues please refer to the following:

Insurance Regulation: www.rbnz.govt.nz/finstab/insurance/4267910.html Insurer Licensing: www.rbnz.govt.nz/finstab/insurance/4268257.html Questions and Answers: www.rbnz.govt.nz/finstab/insurance/4268261.html

RESEARCHING PROVIDERS

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