As the Financial Services Legislation Amendment Act 2019 (FSLAA) came into force on 15 March, the last month has been a key time for insurance and financial services regulation.  This month our Bulletin reviews the changes to the financial advice regime which are now in effect, the proposed guidance for advertising financial products and we will provide an update on the progress of the insurance solvency standards review.  We also provide our general update on relevant legislation.


A new financial advice regime came into force on 15 March – by now, insurers should have implemented changes required by FSLAA.  All insurers who either provide regulated Financial Advice direct to their customers or engage a third party to provide regulated Financial Advice to their customers will be a Financial Advice Provider for the purposes of FSLAA.  A Financial Advice Provider who falls within the scheme of the legislation must:

Comply with the newly imposed duties added under Part 6 of the Financial Markets Conduct Act 2013 (FMCA), including for those providing Financial Advice:

  • Meet the new standards of competence, knowledge and skill included in the Code of Professional Conduct for Financial Advice Services; and
  • Meet the duty to ensure the client understands the nature and scope of the advice at all times; and
  • Give priority to the client’s interests where there’s a conflict of interest by ensuring the financial advice is not materially influenced; and
  • Exercise care, diligence and skill of a prudent financial adviser at all times; and
  • Comply with the new regulations regarding the disclosure requirements and the duty to ensure those disclosures are not misleading, deceptive or incomplete.

Hold a transitional licence and comply with the requirements:

  • All Financial Advice Providers should hold a transitional licence. All transitional licence holders are required to:
  • Create and maintain records; and
  • Have an internal complaints procedure.

Provide required disclosures:

  • By now, all insurers should have updated disclosure documents to include all the necessary information required by FSLAA.
  • It is a requirement to for the Financial Advice Provider’s website to include the Financial Advice Provider Disclosures. These need to be in a prominent place on the website and include the required publicly available information as required by the relevant Regulations.

All Financial Advice Providers can now apply for a full licence under the regime. The full licence imposes additional conditions on licence holders which all insurers will need to be aware of. All transitional

licence holders will be required to hold a full licence in two-years time to be able to continue to provide financial advice or engage others to give regulated financial advice on their behalf.


Consultation for the proposed guidance for advertising offers of financial products closed on 16 February 2021. 

The changes to the Financial Markets Conduct Act 2013 (FMCA) by FSLAA will impact how financial products (which now include insurance policies) are advertised. The proposed guidance looks to clarify when advertisements of financial products are deemed to be “restricted communications”. Advertisements will be restricted communications if they are reasonably likely to induce someone to apply for, or make further contributions, investments or deposits into a financial product.

The proposed guidance mainly considers how the fair deal dealing requirements set out in Part 2 of the FMCA apply to advertisement of financial products. It looks to prevent advertising offers which are misleading and deceptive.


As mentioned in last month’s Bulletin, the Reserve Bank commenced the review of the Insurance Solvency Standards in October 2020. The Reserve Bank requested public submissions on the proposed principles governing the Solvency Standard review. The results of the consultation on the Principles have been released as a feedback statement this month. The feedback statement can be found on the Reserve Bank’s website here.

Overall, there was general support for most of the principles of the review with some minor changes being made. The revised principles for the review of the solvency standards are:

  • To take a substance over form approach and tailor requirements to New Zealand specifically.
  • To have regard to international comparability, particularly LAGIC, Solvency II, the ICS and the ICPs with the caveat that principle number 1 will take precedence.
  • Capital must be of sufficient quality to enable insurers to meet obligations to policy holders in a range of adverse scenarios.
  • The quantum of capital requirements should be set in relation to material risks that may impact the insurer’s ability to meet its obligations to policyholders.
  • Insurers should be subject to consistent methods and consistent assumptions in determining capital requirements.
  • Capital requirements of New Zealand insurers should reflect a risk-based approach, taking into account the risks that are specific to New Zealand, the nature of the New Zealand market, and the Reserve Bank’s regulatory approach.
  • The solvency should be transparent to enable effective market discipline.
  • To have regard to how the solvency requirements work together with other regulatory measures to meet IPSA’s principles and purposes.

These principles will guide the ongoing work on the review of the solvency standards. The Reserve Bank is welcoming comments on the review at any point during the review period. Any views can be emailed to insurancesolvency@rbnz.govt.nz.


Financial Markets (Conduct of Institutions) Amendment Bill

The Finance and Expenditure Select Committee reported on the Financial Markets (Conduct of Institutions) Amendment Bill on 7 August.  The Bill now awaits its second reading.

Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill

The Insurance (Prompt Settlement of Claims for Uninhabitable Residential Property) Bill had its first reading on 21 July 2020.  The Governance and Administration Select Committee accepted submissions until 11 December 2020 and its report is due 12 April 2021.

Fair Trading Amendment Bill

The Fair Trading Amendment Bill passed its first reading on 12 February 2020.  The Economic Development, Science, and Innovation Committee is considering the Bill.  Submissions closed on 26 April 2020.  The Committee’s report was due on 12 August 2020 but is yet to be released.

Insurance Contract Law Review

The exposure draft Bill for consultation is anticipated to be released mid-2021.
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
E:  elspeth.horner@mhlaw.co.nz
P:  04 974 4702

Laura Sookahet/Senior Associate
E:  laura.sookahet@mhlaw.co.nz
P:  04 974 4701

Andrew Goble/Senior Solicitor
E:  andrew.goble@mhlaw.co.nz
P:  04 974 4704

Mitchell Souness/Solicitor
E:  mitchell.souness@mhlaw.co.nz
P:  04 974 4706

Patrick Gerard/Solicitor
E:  patrick.gerard@mhlaw.co.nz
P:  04 974 4707

Stacey Craig/Law Clerk
E:  stacey.craig@mhlaw.co.nz
P:  04 974 4700