The Reserve Bank is proposing to put in place an insurance policyholder protection scheme, along the lines of protection for bank deposits.
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The central bank said the scheme would reduce the likelihood that an insurer might become unable to make claims payments owed to policyholders.
The Reserve Bank's deputy governor and general manager for financial stability Geoff Bascand said the proposal was part of an ongoing review of the insurance sector.
"The consultation also reviews the legislation governing the amount of capital insurers maintain as a buffer in case of adverse events - otherwise known as their 'solvency capital' - and asks whether there should be greater clarity about policyholders' rights when some policies are terminated early," Bascand said in a statement.
"We also ask whether New Zealand should consider establishing a guarantee fund for some of policyholders' claims if an insurer fails."
The RBNZ is inviting feedback on the proposal until 15 November.