The Reserve Bank of New Zealand – Te Pūtea Matua has today issued formal directions to Pacific International Insurance Pty Limited following repeated failings with its regulatory reporting.
The directions were made under section 143 of the Insurance (Prudential Supervision) Act 2010. Section 143 gives the Reserve Bank the ability to direct a licensed insurer to carry on its business in a specified way and/or take certain specified actions to address regulatory failures. This action follows warnings issued to Pacific International in 2018 for failing to include its solvency ratio in its New Zealand branch financial statements for three consecutive years.
“Pacific International Insurance has a poor history of non-compliance with its regulatory requirements relating to reporting, disclosure and notification,” Deputy Governor and General Manager of Financial Stability Geoff Bascand says.
“Despite these warnings, Pacific International committed further breaches relating to reporting, disclosure and notification requirements. In January 2020, the Reserve Bank instructed Pacific International under section 126 of the Act to commission an independent report on its systems, regulatory processes, resources and oversight controls,” Mr Bascand says.
“Based on the findings of this independent report, the Directions require Pacific International to strengthen, monitor and continuously improve its compliance systems, controls and processes, and to obtain independent verification of this improvement in a year’s time. The Directions are an escalated regulatory response applying the available regulatory tools to ongoing compliance failures.”
It is an offence under section 148 of the Act to contravene a direction, subject to maximum penalty of three months’ imprisonment or a fine of $200,000 for an individual, and a fine of $500,000 for a body corporate.
The Reserve Bank is currently reviewing its enforcement framework to encourage prudent behaviour, and deter non-compliance. The Reserve Bank recently relaunched its review of the Act. An initial substantive consultation paper – on the scope of the Act and its treatment of overseas insurers – was issued earlier this week.