The Reserve Bank of New Zealand (RBNZ) opens a 12-week consultation on an exposure draft of the Insurance (Prudential Supervision) Amendment Bill, which removes licensing requirements for overseas captive insurers and pauses earlier proposals to bring multi-cell captive insurers within the prudential regime. Published on 15 April 2026, the draft Bill amends the Insurance (Prudential Supervision) Act 2010 (IPSA) and gives effect to a package of modernisation proposals approved by Cabinet in August 2025. It is designed to align New Zealand's insurance framework more closely with international best practice and with the regulatory framework for deposit takers under the Deposit Takers Act 2023 (DTA). Under Clause 7 of the draft, overseas-incorporated captive insurers, defined as insurers providing cover only to a parent entity or related parties, cease to require a licence under IPSA. The same exemption applies to overseas entities that act only as reinsurers in New Zealand. The RBNZ says the changes respond to boundary issues and regulatory gaps that have emerged since IPSA was enacted, and are intended to ensure the licensing perimeter remains risk-based. In a notable shift from Cabinet's original position, the exposure draft pauses proposals to bring multi-cell captive insurers explicitly within IPSA. Cabinet had previously agreed that multi-cell structures, being entities operating more than one ring-fenced cell with each cell's assets and liabilities segregated, would be deemed captive insurers under the Act. After further analysis, including a review of overseas frameworks, the RBNZ now considers that market conduct regulation is better placed to oversee the structure, because multi-cell captives often also provide other financial market services such as investment services. The RBNZ is liaising with the Ministry of Business, Innovation and Employment (MBIE) on an alternative approach outside IPSA. Cabinet approval for the revised position will be sought after the consultation, in the first quarter of 2027. Separately, the Bill requires all New Zealand-incorporated insurers to hold an IPSA licence regardless of whether they issue contracts to New Zealand policyholders. The change closes a long-standing gap under which domestically incorporated insurers without local policyholders sit outside the licensing perimeter, a point of particular relevance to any New Zealand-domiciled captive writing purely offshore risk. Wider provisions of the Bill include a new proportionality principle, a requirement for the RBNZ to publish a proportionality framework, and a significantly expanded standard-making power. Once enacted, the regulator will be able to issue prudential standards covering governance, risk management, disclosure, contingency and recovery plans, actuarial advice, outsourcing and related-party exposures. A two-tier solvency approach, combining a prudential margin and a solvency margin, is also introduced, alongside a power to restrict dividends at distressed insurers. Penalties are refreshed throughout the Bill. Civil pecuniary penalties of up to NZ$2.5 million for body corporates and NZ$300,000 for individuals replace lower-tier criminal sanctions for breaches of standards and licence conditions, and infringement notices are introduced for low-level offences. A mens rea element is added to the most serious offences, including carrying on insurance business without a licence. "We're seeking technical feedback on the Bill to help ensure the changes work in practice and deliver the policy decisions made by Cabinet last year," says Jess Rowe, director of prudential policy at the RBNZ. "It will also help us identify and avoid unintended consequences and regulatory gaps." Submissions close on 7 July 2026. The RBNZ is expected to recommend that the Minister of Finance seek Cabinet approval to introduce the Bill to Parliament in 2027, with commencement targeted for the fourth quarter of 2028. The new prudential standards, which will be drafted and consulted on separately, are scheduled for completion by 2032.
