COMPLIANCE NEWS – INSURERS
APRIL ISSUE | 2020
This month we look at steps taken by regulators to ease the regulatory pressure on insurers and other financial institutions in light of COVID-19 and the new commencement date for the Privacy Bill currently before Parliament.
We also provide our general update on relevant legislation.
REGULATORY PRESSURE EASED IN LIGHT OF COVID-19
The effects of the novel coronavirus COVID-19 are being felt around the world. New Zealand has reached Level 4 of its COVID-19 Alert System, putting the country in an effective lockdown for at least four weeks. Only businesses that provide essential services may remain open. The Council of Financial Regulators has confirmed the list of financial services that are essential services. This includes insurance services provided by licensed insurers listed in the register of licenced insurers.
Both the Financial Markets Authority (FMA) and Reserve Bank of New Zealand (Reserve Bank) have recognised the extreme circumstances and responded by easing the regulatory burden on the entities they supervise.
The Financial Markets Conduct Act 2013 requires every FMC reporting entity to ensure that compliant financial statements are filed within four months after its balance date. Because of the financial and operational impact that COVID-19 is having and will have on regulated entities, the FMA plans to introduce a class exemption giving affected entities an additional two months to produce audited financial statements. Currently the relief is intended to apply to entities with balance dates from 31 December 2019 to 31 May 2020.
The FMA has announced the start date for the new financial advice regime will be delayed from June 29 to early 2021. The Government has indicated the new start date will be no earlier than March 2021. The transitional licensing window will be extended to to reflect the delay. Any Financial Advice Provider transitional licences that have already been granted will now come into effect when the new regime starts in early 2021. The existing Financial Advisers Act 2008 continues to apply in the meantime.
The Reserve Bank has said it will delay or slow down most of its regulatory initiatives for the next six months. This will both reduce the regulatory burden on financial institutions and free up Reserve Bank resources to support the New Zealand economy through the effects of COVID-19.
Notably, the Reserve Bank said it will defer, for an initial period of six months, external work on the review of the Insurance (Prudential Supervision) Act 2010 and its cyber reliance guidelines for all regulated entities.
Please contact us if you have any questions about the FMA and Reserve Bank regulatory initiatives and how the delays might affect your business.
COMMENCEMENT DATE FOR NEW PRIVACY ACT
On 17 March the Minister of Justice Hon Andrew Little tabled a supplementary order paper (SOP)to amend the Privacy Bill (Bill). The SOP makes several minor changes to the Bill, including a new commencement date of 1 November 2020
Other notable changes include additional advisory functions of the Privacy Commissioner and attributing knowledge of employees and other agents to agencies and principal agencies for the purpose of notifying privacy breaches.
Agencies should already have been familiarising themselves with the changes in the Bill and adjusting their processes accordingly. In light of the 1 November commencement date, agencies have some extra time to ensure they are compliant when the changes come into force. The most significant changes are:
- Restated Information Privacy Principles that have been updated and strengthened to reflect changes to the way personal information is approached and dealt with in New Zealand.
- Clarification that transfer of information to and from an agent (such as a cloud storage provider) is not treated as a disclosure of information.
- A requirement to report privacy breaches that cause or are likely to cause serious harm to the Privacy Commissioner.
- The ability for the Privacy Commissioner to issue agencies with compliance notices to make them do or stop doing something in order to comply with privacy laws.
- Express limitations on disclosure of personal information overseas.
- A requirement for all agencies to appoint one or more privacy officers.
Agencies should have systems and processes in place to identify notifiable privacy breaches when they occur. This includes appointing a privacy officer and implementing procedures for determining whether a breach has caused or is likely to cause serious harm to an affected individual.
Please contact us if you have any questions about the Privacy Bill and how it applies to your business.
Financial Markets (Conduct of Institutions) Amendment Bill
The Financial Markets (Conduct of Institutions) Amendment Bill passed its first reading on 12 February 2020. The Finance and Expenditure Committee will consider the Bill. There has been no progress since our last newsletter. The deadline for submissions to the select committee has been extended to 30 April 2020.
Fair Trading Amendment Bill
The Fair Trading Amendment Bill passed its first reading on 12 February 2020. The Economic Development, Science, and Innovation Committee will consider the Bill. There has been no progress since our last newsletter. The deadline for submissions to the select committee has been extended to 26 April 2020.
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. There is no timeline yet.
Review of the Insurance (Prudential Supervision) Act 2010
The Reserve Bank of New Zealand has paused work on the review of the Insurance (Prudential Supervision) Act 2010 in light of COVID-19 Alert
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. This has not been updated in light of COVID-19.
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.
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.
Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill
The Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill (Bill) was introduced to Parliament in the middle of December 2019. The Bill is designed to prioritise the processing of insurance claims for uninhabitable property. The Bill is currently awaiting its first reading. There has been no progress since our last newsletter.
Disclaimer: The information contained in this newsletter is provided for general purposes only, and should not be construed as legal advice on any matter.
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Mitchell Souness/Law Clerk
P: 04 974 4707