8 responses were received; overall industry generally welcomed the proposed redraft.
Changes include ensuring sufficient capital is set aside against pricing risks and credit risk on bonds, and pre-paid reinsurance premiums fully count towards solvency capital.
NZ CB announced a consultation on the exposure draft of the second amendment of the Interim solvency standard 2023 (ISS), to ensure that the ISS is fit for purpose.
Follows NZ CB Sep. 2023 issued proposal re interim solvency standard, see #185960.
Review Status
ISS was amended in Jul. 2023 by the Interim solvency standard amendment standard 2023 and applies to all non-exempt insurers according to their license conditions.
Second amendment of ISS will address remaining issues within scope of the first stage of the solvency review - structure of solvency regime and handling of NZ IFRS 17.
Initial round of consultation on the second amendment of ISS held in Sep. 2023.
Valuable feedback was received from stakeholders; in response to this input and the findings of an external review, additional changes have been made to the standard.
The accompanying feedback statement explains how NZ CB has responded to stakeholder feedback from the first consultation in the revised exposure draft.
The feedback statement also includes broad conclusions from the external review.
This consultation seeks feedback on the exposure draft of the updated standard.
Second Amendment of ISS
The second amendment of ISS does not introduce new policy or require an increase in capital requirements beyond what was intended when the ISS was first issued.
Instead, this amendment aims to restore the original policy intent of the ISS.
The most significant proposals in this amendment relate to the rebasing of the underwriting risk capital charge, reinstating credit risk capital charges on interest-sensitive assets and reducing ambiguity relating to valuation approaches.
Documents Published
As part of the consultation, the documents listed below have been published.
Documents are Interim solvency standard amendment standard 2024 (revised draft);Interim solvency standard 2023 (revised draft, consolidated version);Interim solvency standard 2023 (revised draft, consolidated version with changes tracked).
Additionally, the Guidance on the interim solvency standard 2023 (revised draft).
Webinar will be held on Aug. 21, 2024 to discuss revised consultation documents.
Next Steps
Feedback is being sought that particularly addresses concerns with specific drafting.
Stakeholders are welcome to provide broader feedback, but NZ CB expects to defer considering such feedback until stage 2 of the review of the solvency standards.
After the consultation closes on Sep. 17, 2024, NZ CB will consider feedback and plan to publish the standard in Dec. 2024; the standard will commence on Mar. 1, 2025.
Effectiveness
The comment period for this consultation closes on Sep. 17, 2024.
8 responses were received; overall industry generally welcomed the proposed redraft.
Changes include ensuring sufficient capital is set aside against pricing risks and credit risk on bonds, and pre-paid reinsurance premiums fully count towards solvency capital.
