Bill to introduce proportionality principle in Insurance (Prudential Supervision) Act
The Reserve Bank of New Zealand (RBNZ) – Te Pūtea Matua has launched a consultation seeking technical input, due by 7 July 2026, on an exposure draft of a bill aiming to amend the Insurance (Prudential Supervision) Act 2010 (IPSA).
In a news release, the RBNZ shared that it will keep its consultation open for 12 weeks. The bank expects to introduce the amending legislation to the House of Representatives next year.
Jess Rowe, the RBNZ’s prudential policy director, said the consultation seeks to ensure that the proposed amendments can work in practice, deliver Cabinet’s policy decisions issued in 2025, and address any regulatory gaps and unplanned impacts.
The bank noted that the planned updates will expand the range of standards it releases. Rowe added that the contemplated changes introduce a proportionality principle into IPSA, which will require a published framework adapting regulation to an insurer’s size and nature.
“This complements existing Reserve Bank obligations, including considering the impact of our decisions on competition in the insurance sector,” she said in the news release.
“Insurance plays a key role in many of New Zealanders’ biggest financial decisions,” Rowe said. “That’s why a sound and efficient insurance sector matters to everyone, and New Zealanders need to have confidence in the sector.”
The RBNZ explained that the amending legislation aims to improve New Zealand’s insurance sector, modernise insurance regulation, enhance it through a clear and transparent rules-based approach, and more closely align it with international practice.
Rowe added that the draft bill intends to help the RBNZ be more transparent, risk-based, and proactive as a regulator.
“A strong regulatory environment must be both sound and efficient,” Rowe said in the RBNZ’s news release.
“These reforms are broadly positive and long overdue,” according to a legal update from MinterEllisonRuddWatts partners Lloyd Kavanagh and Jeremy Muir.
Per an article prepared by senior associate Andrew Suggate and senior solicitor Janet Liu in Buddle Findlay’s Auckland office, “while this will not be a complete overhaul of insurance prudential supervision it will introduce significant new requirements for insurers.”
“The bill is intended to expand the Bank’s standard‑setting, supervisory, and enforcement powers, introduce a more granular solvency regime, tighten fit and proper and transaction approval requirements, and align insurer distress management with the newer framework for deposit takers,” stated an insight from Bell Gully’s Auckland office.
Noting that the extensive process to review the IPSA began a decade ago, Bell Gully’s consultant Glenn Joblin and partners Gabrielle Menzies and Sam Hiebendaal stressed that “some changes in the bill that differ from those previously proposed.”
“The new enforceable standards regime could impose significant compliance costs, particularly for smaller insurers, and the Reserve Bank’s supervisory powers such as those for on-site inspections must be sufficiently clear so insurers know what to expect,” stated MinterEllison’s update.
“Many insurers will rightly be focused on the significant work required for Contracts of Insurance Act 2024 projects, however regulatory affairs and change management teams should ensure they remain across the implications of IPSA,” added Buddle Findlay’s article.
