Concerns raised over the RBNZ approving the sale of 200,000 AMP Life insurance policies to a Bermuda-based private equity firm

Concerns raised over the RBNZ approving the sale of 200,000 AMP Life insurance policies to a Bermuda-based private equity firm

There are fears the conditions the Reserve Bank (RBNZ) has put on the proposed sale of AMP Life to Bermuda-based private equity firm, Resolution Life, don’t go far enough to protect the interests of the insurer’s 200,000 New Zealand policyholders.

Having spent 18 months reviewing the application, the RBNZ on Tuesday provided the final regulatory approval AMP/Resolution needed to push on with the A$3 billion deal.  

The RBNZ’s general manager of financial stability, Geoff Bascand, said: "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." 

However, an AMP Life policyholder with a background in investment banking, Andrew Body, was concerned that without writing new policies, Resolution Life wouldn’t be incentivised to maintain goodwill in the market. Accordingly, he worried any claims and bonuses owed to policyholders could be put at risk.

While Resolution Life will be required to honour existing policies, Body said contract terms were often “very general” and relied on “trust”.

He said it would be costly for policyholders, who may’ve spent decades paying premiums for their AMP Life policies, to change insurers should they be unhappy with Resolution Life. They could also lose cover for health conditions developed after taking out their initial policy.  

RBNZ focussed imposing conditions around governance   

Russell Hutchinson, the founder of Chatswood Consulting, which provides advisory services to insurers, was comfortable with the proposed sale.

He said the RBNZ’s requirement for a ‘New Zealand Policyholder Advisory Committee’ to advise the board on “matters relating to the interests of New Zealand policyholders” reflected the kinds of governance requirements around conduct soon to be implemented across the sector.

Hutchinson also supported the requirement for a trust to be set up to hold capital and assets in New Zealand.

‘Resolution Life New Zealand’ - which will be locally incorporated - will need to have a board comprised of mostly New Zealand resident, independent directors. The company will be a trustee to the trust and effectively manage the assets held in the trust.

Anne Blackburn has been appointed chair of the Resolution Life New Zealand board. She is the chair of the Government Superannuation Fund Authority and holds a number of directorships, including on the TSB and Fisher Funds boards.

Are the RBNZ’s powers too constrained by the law?

Body is due to raise his concerns at a parliamentary Finance and Expenditure Committee meeting next Wednesday. He presented a petition on May 19, calling for an urgent review of the law the RBNZ exercises its powers under, as it licences insurers and monitors their solvency - the Insurance (Prudential Supervision) Act 2010 (IPSA).

However, the RBNZ on Tuesday said its review of IPSA would only resume at the start of 2021. The review has been put on hold twice - first due to the RBNZ being tied up with failed insurer, CBL Insurance, and then due to COVID-19. The review is expected to take two to three years, after which a legislative process will be required.

The RBNZ said concerns raised around its role in proposed sales of insurance businesses would be considered in the review including, “increased policyholder protection, making regulatory processes more efficient and removing unnecessary compliance costs on the industry”.

However Body wanted Finance Minister Grant Robertson to step in before the election and amend IPSA regulations to reflect the risk transactions like the AMP/Resolution one expose policyholders to. He said the RBNZ’s focus on solvency issues was too narrow.  

Both Robertson and Commerce and Consumer Affairs Minister Kris Faafoi said they didn’t provide any input into the RBNZ’s decision on AMP Life.

“It’s entirely the decision of the Reserve Bank,” Robertson said, expressing confidence in the RBNZ’s ability to protect policyholders’ interests.

National’s associate finance spokesperson Andrew Bayly said if he was in Robertson’s shoes, he’d be asking the RBNZ for reassurances.

Bayly, who has previously raised concerns over the sale of AMP Life, said the establishment of a ‘New Zealand Policyholder Advisory Committee’ would be a “good outcome” if it truly was independent.

He believed that for a sale the scale of this one, there should be more oversight beyond that of the RBNZ. He recognised the RBNZ’s remit was constrained by the law.

Debate over how many of the gaps new ‘conduct’ regulations would solve

However National in February voted against the first reading of a bill that seeks to introduce a new licensing regime, run by the Financial Markets Authority (FMA), for the conduct of insurers, banks and non-bank deposit takers.

If the Financial Markets (Conduct of Institutions) Amendment Bill is passed, Resolution Life would have to implement policies, processes, systems and controls to meet a “fair treatment standard”. This would, among other things, see its claims handling regulated.

The Bill does not however impose obligations on insurers or the FMA in relation to transfers or amalgamations of insurance businesses.

Nor does it address what Body described as “secrecy”, as he’s struggled to get information from the RBNZ around the proposed sale.

Body believed the Bill, which largely focuses on the way financial products are sold, was an “unhelpful distraction” that would be ineffective in addressing his concerns about IPSA.

The Bill is still before the Finance and Expenditure Committee.

Resolution Life has ‘served the needs’ of over 10 million policyholders

Interest.co.nz has reached out to Resolution Life for comment but hasn’t received a response.

Resolution Life said on its website: “Since 2003, prior Resolution entities have committed over US$15 billion of equity in the acquisition, reinsurance, consolidation and management of 28 life insurance companies. Together, these companies have served the needs of over 10 million policyholders while managing over US$320 billion of assets.”

No one from AMP Life was available to talk to interest.co.nz, but a spokesperson said: "For customers, there will be no change to their existing insurance policy terms or conditions. They will benefit from Resolution Life's deep expertise in managing in-force insurance policies and its commitment to customer service."

AMP Life said it would provide an update to the market on July 1.

AMP’s share price rose 10% on Tuesday to $2.05.

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22 Comments

Companies based in Bermuda have a habit of not paying when it's time to collect on a policy. Assume the policy is now worthless and pay premiums to a provider subject to New Zealand law.

I am a policy holder and agree with you, and may have to cash it in early before nothing is left.

Governments appear to beholden to global financial institutions, which seem to set the rules. Regulation was and is never going to happen under National, based on their past track record and pattern of their ex politicians being appointed to banking positions. I had held out some hope with Labour, but it seems Grant Robertson is unwilling to call their bluff.

The sooner governments stop giving life support to these multi national banksters the better. I'm on the shopping list for a safe, to ensure when governments cant save them they don't take some of my hard earned savings down with them.

Robertson doesnt know his @ss from his elbow. His attitude will be, if the RBNZ said it was ok, then its ok.

Remember when this come in front of the Finance and Expenditure committee.... National asked Orr about communication to policy holders.... and Orr deferred to Bascand.. and Bascand said... "um.. yea.. didnt think about that yet".

be depressing to be a policy holder ,who had paid life insurance premiums for 25 years or more, to find out he is trapped in a zombie fund now part of a collection owned by an entrepeneur in a tax haven.

My hand is up, and I'm 46 years in...... and very pissed off!

Yeam.. im 44 and could would be very interested to know how the portfolio of lives is distributed.... the risk is you live too long and there is nothing left in the fund to pay you out

Especially if you have a "whole of life policy" which was supposed to have a surrender value???

I think we are in this boat. I dont know the terminology well - my wife has three annuity policies (?mature at certain date and can be collected/cashed in with bonuses then) which were taken out when she was a child and to which we continue to put in $200 a month.

I think we need some expert independent advice on our risks and benefits. Happy to pay someone to look at it. Now who to call?

Most Whole of Life, Endowment or Investment Linked funds allow some early or partial withdrawal after a certain date or age... best check your policy details on early withdrawals. You sometime forfeit some of the annual bonuses, but not always all of them.
If you can take out the majority of the funds, reduce the monthly contributions and they put the policy into an inactive mode.
Best to talk to AMP now about this or the agent who sold you the policy.

Thanks Spaceboy I appreciate the reply. Policies taken out 40 years ago by my in laws so the agent probably moved on one way or another. Time to get reading and talk to AMP I guess. I'd hoped to set and forget till maturity but maybe the ground shifted.

As soon as we see Private Equity firm, we see extract money put in to get deal, extract large fees from Equity firm, billing victim. Both of course funded by ridiculous debt provided by commission salesmen using other people's money. Once the Private Equity firm have their money, and the victim's top execs have all got a large bonus as well to shut them up and keep them on board, the whole thing is walked away from and allowed to go belly up with much self righteous gnashing of teeth from all who lost value in the project.

Private equity half-owns NZ's fastest growing life insurer - that doesn't seem to stop advisers writing new policies.

Yea.. fastest growing would be due to the large upfront brokerage payments paid to advisers for sending clients there way... again.. something this government has failed to address.

Originally i was with Govt Life and now its Foundation Life and we are getting a vote (hopefully)later in the year to either wind up a take the money or transfer to another company.
My vote will be WIND UP and Take the Money.
At least we will get a choice.(hopefully)

I am in the same boat. It will all come down to the vote by the policyholders as to what the company will do. My preference is also to Wind Up with a suitable Surrender Value payout. There is a broker available to buy your policy should Foundation's offer not be acceptable.
I hope my wife gets the same process with her AMP policy.

Warning - it also includes income protection policy's

I am really confused by all these comments. I have a policy that has been running for many years. Should I let it continue and hope for the best. Or should I take the cash value now?

a question for your adviser... they are collecting brokerage for sending you to AMP.. time they earnt it

A lot of these people are doomsters THE WORLD IS GOING TO END...…………..
A run on funds will make the company broke , let things takes it course , I am a member of Amp I have never been asked to vote , however I do have concerns about a zombie fund

It’s a shame AMP decided not to improve their product benefits so advisers could write new business. Management should be ashamed of themselves. Yet another example of the destruction of a trusted brand.

As an AMP policyholder the communication has been woeful. Absolutely no care at all for the policyholders and I have very little confidence in the RBNZ ensuring Resolution Life actually fulfil their obligations.

First I have heard of AMP establishing a separate RLNZ board to consider the interests of policy shareholders. Why am I hearing this here? Which independent actuary did the RBNZ use?

Bascand has been at the forefront of a diabolical series of errors by the RBNZ and I have no confidence in the RBNZ's ability to oversight insurers.

Have RBNZ instructed RLNZ or AMP to notify and communicate with policyholders and explain their options. What is RLNZ's claims paying rating?

Completely in the dark and RBNZ should be taking AMP directors to task about the complete disregard given to policyholders.

In February the Deputy Governor was forced to concede they had not considered the necessary disclosures to policyholders...
"Bascand responded: “I will have to take that under advice…

“You’re asking about what disclosure requirements - if any - we should impose and I need to consider that.

“I mean, we clearly are very mindful that they need to meet the prudential requirements - the securing of the funds if you like, the governance of the institution, the stability, the fact that this institution will remain sound.”

Ok - so... 4 months on.. What conclusions have the RBNZ made with regards "disclosure requirements"... or do they still need to consider that?

I understand the RBNZ have used an independent actuary to advise them. Who? What approach have they taken? What stresses has that actuary applied to the assumptions regarding life expectancy tables and mortality rates? What are the demographics of the portfolio? How did the RBNZ satisfy themselves the use of one actuary was sufficient?

I am expecting this information to be disclosed to policyholders or I will be seeking the above information via an Official Information Act request.