The Reserve Bank of New Zealand (RBNZ) has reiterated that before any change of control of a licensed insurer takes place, the central bank must be satisfied that the change of ownership does not alter the insurer’s ongoing eligibility to retain its New Zealand licence.
The central bank issued a statement in response to media reports about public interest in the sale of the ownership of AMP Life to Resolution Life. Resolution Life is proposing to purchase the shareholding in AMP Life from AMP. AMP Life is licensed as an insurer in New Zealand and operates as a branch with its head office in Australia. The change of shareholding will result in a change of control of AMP Life.
Concerns have been voiced that since Resolution Life is a “run-off” company that doesn’t write new policies, it doesn’t have the same incentive to treat customers well to maintain a good reputation as businesses that seek to attract new customers do.
The overriding purpose that guides the Bank in any proposal before it is to promote a sound and efficient insurance sector and promote public confidence in the sector, RBNZ deputy governor Geoff Bascand says.
“We understand that policyholders have a strong interest in this process. We support active and on-going communications between AMP Life and its policyholders to ensure that policyholders have adequate information to understand the implications of the proposed change.”
The Bank states that it will make its decision against criteria in the Insurance (Prudential Supervision) Act, including:
whether the change of ownership will affect the solvency of the licensed insurer;
the licensed insurer’s ability to carry on its business in a prudent manner; and
the licensed insurer’s incorporation and ownership structure (ownership, governance structure, and financial strength) taking into account the size and nature of its business.
If the change in shareholding is likely to lower the standard in respect of any of those matters, the Bank is able to impose conditions upon the insurer’s licence, or to decline approval of the change of control.
“Although effective disclosure of key information is a core part of New Zealand’s prudential regulation regime, the law restricts when the Reserve Bank may disclose information in place or on behalf of insurers as well as its own deliberations,” Mr Bascand said.
RBNZ also provides some guidance on changes in ownership of an insurer to assist policyholders’ understanding . Specifically:
a change of control does not change contractual entitlements of policyholders. Their terms and conditions are unaffected; and
a change of control does not affect a policyholder’s right to enforce their contract if they consider their entitlements have not been met.
A change of control – as has been proposed in this transaction – can be contrasted with a sale and transfer of policies from one insurer to another. A change of control is a change in shareholder but the insurer remains the same; a transfer of policies means the policyholder has a new insurer.
“We note that this type of transaction, as it has been proposed, is not unique to New Zealand. Internationally, there has been a trend of consolidating ownership of life insurers into global specialist life insurers,” Mr Bascand said.
RBNZ adds that it cannot be specific about how long the approval process for the AMP Life purchase may take, or when approval will happen, if it does. The time taken to make these deliberations reflects the quality of the information supplied by the insurer and the final form of the proposal. AMP Life / Resolution have set out a preferred timetable for the transaction to complete by 30 June.