New Zealand IPSA loses captives and ‘credibility’

Vicky Beckett 07/12/2011

Five Australian captives have been asked to leave New Zealand as under new legislation they do not have sufficient policy holders for a licence.

Under New Zealand’s new Insurance (Prudential Supervision) Act foreign insurance companies can be refused a licence unless they have a significant New Zealand asset base.

To date two potential captives have ruled out New Zealand as an acceptable domicile Peter Lowe, Willis general manager, New Zealand, has reported.

Steven Chirico AM Best assistant vice-president, said: “Some of the smaller, niche insurers could fall short of new standards under the Insurance (Prudential Supervision) Act (IPSA) as minimum capital requirements (MCR) are deemed to be too onerous.”

However, Lowe explained the $1m MCR and solvency calculation ‘is no more stringent than other captive domiciles, in particular Bermuda, Guernsey, Cayman Islands and Vermont.’

“However, Singapore has a significant advantage over New Zealand and other international captive domiciles with its approach to MCR and solvency margins,” Lowe added.

“Captives owned by New Zealand companies have evaluated local domiciles within easy reach and time zone of New Zealand, namely Vanuatu, Cook Islands and Singapore.”

However, a spokesperson from the Reserve Bank of New Zealand argues that section 4 of IPSA includes the need to avoid unnecessary compliance costs and to maintain competition in the insurance sector.

“IPSA also contains provisions which recognise that some requirements are not appropriate for all types of insurers and that captives do not insure members of the public,” she said.

“The minimum capital requirement of $NZ3m for non-life insurers has been reduced to $NZ1m for captive insurers and the requirement to have an insurer financial strength rating does not apply to these entities.”

Lowe said the IPSA regulations have ‘led to a loss of employment, taxation dollars and credibility for the New Zealand Insurance legislation.’

IPSA is now in force with a graduated approach until September 2013.

All insurance companies and captives must have provisional licences issued by 31 March 2012 and a final licence will be issued to them by September 2013.

Tags: Captives, IPSA, Minimum capital requirement, New Zealand, Regulation, Reserve Bank of New Zealand, Solvency, Willis

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New Zealand IPSA loses captives and ‘credibility’

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