The protracted proposed sale of AMP Life to Bermuda-headquartered Resolution Life now seems finally set to go ahead after the Reserve Bank gave its tick to amended proposals from Resolution.
Under the new proposals from Resolution there will be various protections put in place for the New Zealand policy holders.
A statement from the RBNZ on Tuesday said it had approved the proposed sale of AMP Life to Resolution Life, "in a revised arrangement that is subject to a number of conditions imposed to protect policyholders".
RBNZ Deputy Governor and General Manager for Financial Stability Geoff Bascand said the central bank had been reviewing the proposed transaction and consulting with the parties involved over the past 18 months "to ensure the deal met our requirements".
The transaction involves a change of control and ownership of AMP Life from AMP Ltd to Resolution Life. Resolution Life is a specialist life insurance business owner whereas AMP Ltd wishes to exit the life insurance ownership business.
AMP insurance policy holders’ relationship in New Zealand is with AMP Life and, while that company will have a new owner, existing policy entitlements are unaffected by this transaction.
"Because AMP Life is a branch of an Australian business and intended to be in ‘run-off’ and not write new business, special arrangements were needed for the security of New Zealand policyholders," Bascand said.
"A bespoke trust model has been established that ensures supervisory objectives are better met, future industry dynamics are generally more positive, and there is additional protection in the event of insolvency - one of the key risk considerations that we have been seeking to mitigate."
The Trust is required to hold capital and assets in New Zealand that help provide long-term security for policyholder benefits or investments, where relevant. The Trust will be under the management and scrutiny of relevant officers in New Zealand, who have appropriate influence and authority in respect of the New Zealand operations, for the purpose of securing equity across all policyholders.
In addition, the model will see the establishment of a new, locally incorporated insurer Resolution Life New Zealand (RLNZ). The RLNZ board will have a majority of New Zealand resident, independent directors. RLNZ will act as Trustee to the Trust and will effectively manage the assets held in the Trust.
AMP Life has also established a New Zealand Policyholder Advisory Committee. The Committee is a sub-committee of the AMP Life Board, and will include RLNZ’s independent directors. Its purpose is to provide advice to the AMP Life Board on matters relating to the interests of New Zealand policyholders.
Approvals required to support the model have been granted by the Reserve Bank.
"In making its decision the Reserve Bank sought and considered advice from an independent actuary, and liaised with the Australian Prudential Regulation Authority (APRA) in reaching our conclusion," Bascand said.
The Reserve Bank is reviewing the Insurance (Prudential Supervision) Act 2010 (IPSA). This review was put on hold in line with the regulatory relief offered by the Reserve Bank in response to the Covid-19 pandemic, and some of the matters raised regarding the Reserve Bank’s role in considering the sale and wider oversight of the insurance sector will be factored into this review including; increased policyholder protection, making regulatory processes more efficient and removing unnecessary compliance costs on the industry. The Reserve Bank intends to resume the IPSA review from the first quarter of 2021, with an overarching consultation on the review’s scope. The review is likely to be a two to three year process.