Proposed RBNZ inspections power sparks concerns
The Reserve Bank of New Zealand (RBNZ) says a proposal to extend its powers to carry out on-site inspections without notice as part of insurance supervisory reforms has sparked significant concern.
“It was pointed out that this was quite a robust power that might have a chilling effect on the relationship with regulated entities,” a feedback report released today says.
“There might also be practical difficulties in accessing the information sought or finding personnel of appropriate seniority to answer questions during a sudden visit, especially given flexible working arrangements.”
RBNZ says it’s likely some form of compulsory on-site inspection power will be included in its review of the Insurance Prudential Supervision Act (IPSA) recommendations since Cabinet has already decided that the power should apply for all sectors regulated.
“We will give the notice periods and other safeguards for an on-site inspection power further consideration,” it says. “We would like to reassure insurers that, if we were to retain a power to conduct inspections without notice, this would not be the normal way in which on-site visits were conducted and would only be used where absolutely necessary.”
Feedback was mixed about a possible breach-reporting framework, with respondents wanting more information about how it would work and arrangements that would mean it wouldn’t be too onerous to operate.
“If a breach reporting regime were to be introduced, an insurer’s duty to monitor compliance would be contained in IPSA, but the details of the scheme, particularly materiality criteria, would need to be set out in standards and there would be further industry consultation at that stage,” RBNZ says.
On enforcement and penalties, RBNZ says there was strong support for the general principle that the it should have a more graduated and proportional set of penalties and enforcement tools.
“Feedback highlighted that it is important for the Reserve Bank to provide clear policy guidance about how these tools can be used, and noted the importance of proper safeguards being in place for the use [of] our supervisory powers,” it said.
The consultation was the third conducted as part of a review of the IPSA. A fourth consultation, on governance, supervisory processes and disclosure, is set for next month.
Once that’s completed, RBNZ will produce an omnibus consultation to provide transparency around in-principle decisions on all the issues raised so far.
