The Reserve Bank of New Zealand (RBNZ) has issued a formal warning to Quest Insurance Group Limited for breaches of key obligations under the Insurance (Prudential Supervision) Act 2010 (IPSA).
As New Zealand’s regulator for banks and insurers, RBNZ’s warning emphasised the importance of regulatory compliance in maintaining the resilience of the country’s financial system.
According to RBNZ, Quest’s regulatory breaches included failing to maintain the required minimum solvency margin for its non-life insurance operations and not managing a statutory fund for its life insurance business, both of which are essential for financial stability.
Christian Hawkesby, the RBNZ’s deputy governor and general manager of financial stability, said that prudential requirements such as good governance exist to protect policyholders and promote a sound and efficient insurance industry.
“Prudential requirements such as good governance exist to protect policyholders and to promote the maintenance of a sound and efficient insurance sector,” he said.
In response, Quest has acknowledged and addressed these compliance issues and said it is taking steps to bolster its risk management practices to avoid future lapses.
The company said that the compliance issues had no impact on its ability to meet claims payments for policyholders.
RBNZ’s decision to issue the warning followed its Enforcement Framework and Warning Policy, underscoring the importance of prudent risk management and governance within the insurance industry to sustain public confidence.
“The findings from this investigation demonstrate the importance of effective risk management and the need for sound governance to ensure the New Zealand public has trust and confidence in the insurance sector,” Hawkesby said.
In a related update, RBNZ removed an additional solvency margin requirement it previously imposed on Tower Limited, lowering the company’s minimum solvency margin from $15 million to zero.
The decision reflects Tower’s strengthened solvency position, bolstered by its improved risk management and a reduction in claims related to the Canterbury earthquakes.
As of June 30, Tower’s unaudited adjusted solvency margin was reported at NZ$147.2 million. The insurer emphasised that its internal capital management processes aim to maintain a solvency margin that exceeds RBNZ’s minimum requirements.
The removal of the additional margin will not impact Tower’s dividend plans or other capital management strategies, as the company will continue to adhere to conservative solvency practices.
