Friday 19th July 2019
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The Reserve Bank says it hasn’t changed its approach to applications for changes of ownership of life insurance companies and nor has there been any change in New Zealand insurance law or regulations since October 2018.
That was when AMP announced the sale of its Australian and New Zealand life business to Bermuda-based British firm Resolution Life for A$3.3 billion.
That sale collapsed earlier this week because RBNZ insisted that Resolution Life agree to have separate, ring-fenced assets held in New Zealand for the benefit of the New Zealand policyholders.
RBNZ says in a statement released late today that when AMP and Resolution Life first made contact with it in September last year, it "promptly made them aware of New Zealand regulatory requirements.
“Their proposed transaction would constitute a fundamental change in the nature of AMP Life’s business. AMP would no longer accept new business and the scale of its business would substantially shrink over time. Existing life policies would be ‘run-off’ to expiry over a period of some decades,” the statement says.
“The proposed transfer needs to comply with insurance regulatory requirements” in both Australia and New Zealand and RBNZ has been in frequent communication with APRA “and have a mutual respect of our roles,” it says.
It notes that Resolution Life didn’t formally apply for RBNZ approval until June 7.
AMP has been selling life insurance policies in New Zealand since 1854 and has been operating under an exemption allowing it to operate as a branch of the Australian parent and thus not needing to hold capital in New Zealand.
While it is attempting to renegotiate the sale, AMP has said subsequent events have reduced the businesses’ value by about A$700 million and perhaps more.
The Australian Financial Review had accused RBNZ of making “a change in a 150-year-old regulatory practice for life insurance companies in New Zealand through an out-of-the-blue ASX announcement.”
The AFR also said RBNZ’s actions also demonstrated a “lack of trust in the regulatory oversight of AMP Life” by the Australian Prudential Regulation Authority.
AMP market value dropped about A$1 billion the day the news broke, with the shares falling as much as 17.6 percent to A$1.7725. They recently traded at A$1.78.
New Zealand Prime Minister Jacinda Ardern lunched in Melbourne today with investors in New Zealand, an event the media was excluded from, amid reports that Australian investors were shocked by the RBNZ’s stance on AMP.
RBNZ says the New Zealand regulations relate to the interests of policyholders, solvency standards, financial strength ratings, overseas policyholder preference, risk management, actuarial requirements, financial reporting, statutory funds and governance.
The bank says exemptions like AMP’s “are granted on the basis that standards applicable to Australian incorporated insurers are broadly equivalent to New Zealand standards. In some circumstances, standards for Australian incorporated insurers favour Australian policyholders over New Zealand policyholders, including during ‘run-off,’” it says.
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