This month we look at standard conditions to be included in all transitional licences issued to financial advice providers, new information about the Reserve Bank’s visions for the insurance sector, and a proposed new regime for climate-related financial disclosures.

We also provide our general update on relevant legislation.


Following consultation in the middle of this year, the Financial Markets Authority (FMA) has imposed two standard conditions on all financial advice provider transitional licences.  The conditions relate to record-keeping and complaints processes and will be effective from when the new regime commences on 29 June 2020.

The record-keeping condition is in the following terms:

You must create in a timely manner and maintain adequate records in relation to your financial advice service.

Your records:

  • must be kept in a form (which may be electronic) and manner that ensures the integrity of the information and enables it to be conveniently inspected and reviewed by us;
  • may be in any language providing you create and keep an accurate summary of the record in English and, if required by us, provide a full translation of the record into English by a translator approved by us;
  • must be available for inspection by us at all reasonable times; and
  • must be kept for a period of at least 7 years from the later of:
    • the date the record is made;
    • the date the financial advice to which the record relates is given; and
    • the date any later record is made that refers to or relies upon information in the record.

“You” means the person who holds the licence and each of the licence holder’s authorised bodies.  “Us” means the FMA.

Records will be “adequate” if they clearly demonstrate how:

  • the licence holder;
  • any person engaged by the licence holder; and
  • the regulated financial advice given to retail clients of the licence holder;

meets the requirements of the Financial Markets Conduct Act 2013 (FMCA), the Financial Markets Conduct Regulations 2014 (FMCR), and the Code of Professional Conduct for Financial Advice Services.  Records should be kept of all regulated financial advice given by or on behalf of a licence holder.

The complaints process condition is in these terms:

You must have an internal process for resolving client complaints relating to your financial advice service that provides for:

  • complaints to be dealt with in a fair, timely and transparent manner; and
  • records to be kept of all complaints and any action taken in relation to them including the dates on which each complaint was received and any action was taken in relation to that complaint.

A “complaint” is an expression of dissatisfaction made to a licence holder or a person engaged by a licence holder relating to the licence holder’s financial advice service or the complaints process itself.  “Complaint” includes a complaint about a failure to provide a service or give advice. 

The FMA may also impose additional conditions on transitional licences on a case-by-case basis.  Other conditions will also be imposed on transitional licence holders by the FMCA and FMCR (eg scope of licence, nominated representatives).

Transitional licensing opened on 25 November 2019.  We recommend applying as soon as possible in order to avoid the risk of processing delay.  Please see the FMA’s guide to applying for a financial advice provider transitional licence for more information.

Please contact us if you have any questions about the standard conditions or transitional licensing. 


At the end of October, the Minister for Climate Change and the Minister of Commerce and Consumer Affairs began consultation on a new regime that would require certain companies to assess and report “climate-related financial risks”.  The Government’s stated objective is “to move to a position where the effects of climate change become routinely considered in business and investment decisions in New Zealand.”  The new regime would apply to general insurers and reinsurers, as their underwriting and investment risks and opportunities are affected by climate change.

This follows the Productivity Commission’s (Commission)recommendation that the Government endorse the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD) in its Final Report.  The Commission has recommended the introduction of mandatory “comply or explain” climate-related financial disclosure provisions to the Financial Reporting Act 2013 (FPA). 

The TCFD recommends disclosure in four main areas: governance, strategy, risk management, and metrics and targets.  More information on the TCFD’s recommendations can be found at page 15 of the discussion document.

The consultation discussion document asks four main questions:

  • What are the arguments for retaining the status quo versus introducing new mandatory disclosure?
  • What should be disclosed?
  • Which entities should be disclosing?
  • When should they start disclosing?

The Government’s current proposals can be summarised as follows:

  • Introduce mandatory “comply or explain” disclosure requirements through new legislation.
  • Adopt the TCFD recommendations as the “comply” requirements.
  • Permit explanations for non-compliance only if an entity reports that they see themselves as not materially affected by climate change and why.
  • Apply the new regime to:
    • all entities with public debt or equity;
    • banks;
    • general insurers and reinsurers;
    • asset owners (institutional investors); and
    • asset managers (investment managers).
  • Require disclosures to be made in a stand-alone TCFD report within an entity’s annual report.
  • Not require disclosures to be audited at this stage, but review audit requirements within three years of the regime being implemented.
  • Have the new regime come into effect for financial years commencing six months or later after the date the regime is introduced.

The Government is also consulting on its role in supporting the new regime and seeks information about entities’ net costs of climate-related financial disclosures.

Consultation ends at 5:00pm on Friday 13 December 2019.

Please contact us if you have any questions about the proposed regime.


When Reserve Bank (Bank) Governor Adrian Orr spoke at the Insurance Council of New Zealand’s Conference on 5 November, he outlined several upcoming Bank initiatives in the insurance sector. 

The Bank’s regulation and supervision of the insurance sector is based on its “three pillars” philosophy: (a) self-discipline; (b) market discipline; and (c) regulatory discipline.  Mr Orr explained the Banks intention to strengthen each pillar over the next year or so.

Culture falls within self-discipline.  Following the Bank’s joint report with the FMA into the conduct and culture of life insurers, the Bank believes that all insurers should learn from the review and its findings.  The Bank has written to the boards of general insurers setting out its expectation that they will review their own governance and culture.  The Bank will be following up with non-life insurers in this respect, and will monitor insurers to ensure their plans are implemented effectively.

In terms of regulatory discipline, Mr Orr said the Bank’s review of the Insurance (Prudential Supervision) Act 2010 will commence “in earnest” in 2020.  The review is likely to be informed by the current review of the Reserve Bank Act 1989.  Mr Orr identified a broader range of enforcement tools and a new accountability regime for directors and senior executives as focus areas.  The Bank expects to prioritise the scope of the Act, and also consider whether changes are needed to ensure appropriate competition between overseas branches and locally incorporated insurers.

Mr Orr mentioned the International Financial Reporting Standard IFRS 17 is scheduled to take effect in 2022 for most insurers and will make significant changes to the way insurance contracts are reported.  The Bank’s review of solvency requirements will depend the information produced in accordance with relevant accounting standards.

Importantly, Mr Orr explained “it is too early to say whether or not our review of insurer solvency will lead to the kind of uplift we have proposed for bank capital.”  However, as with banks, a graduated series of thresholds and varied regulatory response options will replace the current single “black line” minimum solvency requirement.  In its Financial Stability Report for November 2019, the Bank explained it will also consider the case for requiring insurers to maintain buffers over and above minimum solvency requirements.

Please contact us if you have any questions about the Reserve Bank’s approach to regulating insurers.


Review of the Insurance (Prudential Supervision) Act 2010

The RBNZ has resumed work on the review of the Insurance (Prudential Supervision) Act 2010.  There is no timeline yet.  Please see the Reserve Bank article in the main body of this newsletter for more information.

Fair Insurance Code

The Insurance Council of New Zealand (ICNZ) has set a date for the revised Fair Insurance Code (Code)to take effect.  The revised Code will be released in 2020 and take effect on 1 April 2020.

Key changes include obligations to “develop, market, and sell products responsibly” and to “identify and address instances of poor conduct” within organisations.  Another feature of the revised Code is strengthened commitment to privacy and clarity in the dispute resolution process.

Insurance Contract Law Review

The Ministry of Business, Innovation and Employment is completing a review of New Zealand’s insurance contract law.  The purpose of the review is to ensure insurance markets work well, and enable individuals and businesses to effectively protect themselves against risk.  The Minister of Commerce and Consumer Affairs Hon Kris Faafoi has explained he considers the review a priority.  A timeline is yet to be provided. 

Privacy Bill

The Privacy Bill (Bill) completed its second reading on 7 August 2019 and now awaits a committee of the whole house.  Minister of Justice Hon Andrew Little highlighted the key changes the Justice Committee (Committee) made in response to submissions. 

Maritime Transport (Offshore Installations) Amendment Bill

The Transport and Infrastructure Committee (Committee) have reported on the Maritime Transport (Offshore Installations) Amendment Bill (Bill).  The Committee recommended:

  • lowering the threshold for making a claim from “liability” to “alleged liability”.  This would allow a claimant to commence proceedings before liability is proven or is still in dispute;
  • adding a requirement that claimants obtain leave of court to commence proceedings.  This would ensure that claimants have a legitimate claim;
  • confirming that insurers cannot raise defences based on owners’ (insureds’) acts or omissions that occur after the event giving rise to liability; and
  • removing an unnecessary reference to the Law Reform Act 1936.

The Bill intends to strengthen the requirements of owners of offshore oil and gas installations to hold insurance for liabilities to the Crown and other third parties affected by oil spills.  Importantly, the Bill seeks to clarify the liability of insurers to the Crown and others affected by an oil spill, and confirm the circumstances in which claimants can proceed against an insurer.

Our next Compliance News – Insurers Bulletin will be February 2020

Disclaimer:  The information contained in this newsletter is provided for general purposes only, and should not be construed as legal advice on any matter.

Elspeth Horner/Principal
P:  04 974 4702

Laura Tidey/Associate 
P:  04 974 4701

Andrew Goble/Solicitor
P: 04 974 4704

Mitchell Souness/Law Clerk
P:  04 974 4707