Source: Reserve Bank of New Zealand
The Reserve Bank of New Zealand is aware of media reports and public interest in the sale of the ownership of AMP Life to Resolution Life. It is helpful for the Bank to explain the process that is underway and where it fits in.
Resolution Life is proposing to purchase the shareholding in AMP Life Ltd from AMP Ltd. AMP Life is licensed as an insurer in New Zealand and operates as a branch with its head office in Australia. The change of shareholding will result in a change of control of AMP Life.
However, before any change of control of a licensed insurer takes place the Reserve Bank must be satisfied that the change of ownership does not alter the insurer’s ongoing eligibility to retain its New Zealand licence.
The overriding purpose that guides the Bank in any proposal before it is to promote a sound and efficient insurance sector and promote public confidence in the sector, Deputy Governor Geoff Bascand says.
“We understand that policyholders have a strong interest in this process. We support active and on-going communications between AMP Life and its policyholders to ensure that policyholders have adequate information to understand the implications of the proposed change.”
The Bank will make its decision against criteria in the Insurance (Prudential Supervision) Act 2010 (the Act) including:
- whether the change of ownership will affect the solvency of the licensed insurer;
- the licensed insurer’s ability to carry on its business in a prudent manner; and
- the licensed insurer’s incorporation and ownership structure (ownership, governance structure, and financial strength) taking into account the size and nature of its business.
If the change in shareholding is likely to lower the standard in respect of any of those matters, the Bank is able to impose conditions upon the insurer’s licence, or to decline approval of the change of control.
“Although effective disclosure of key information is a core part of New Zealand’s prudential regulation regime, the law restricts when the Reserve Bank may disclose information in place or on behalf of insurers as well as its own deliberations,” Mr Bascand says.
That being said, we are able to assist policyholders’ understanding with some general comments about changes in ownership of an insurer. Specifically:
- a change of control does not change contractual entitlements of policyholders. Their terms and conditions are unaffected; and
- a change of control does not affect a policyholder’s right to enforce their contract if they consider their entitlements have not been met.
A change of control – as has been proposed in this transaction – can be contrasted with a sale and transfer of policies from one insurer to another. A change of control is a change in shareholder but the insurer remains the same; a transfer of policies means the policyholder has a new insurer.
There are a number of reasons why a shareholder may want to sell its holdings or why a purchaser may want to take ownership and control of an insurer. The Bank will take into account, as best as it is able, the effect of these on the requirements laid out in law when making its decision.
“We note that this type of transaction, as it has been proposed, is not unique to New Zealand. Internationally, there has been a trend of consolidating ownership of life insurers into global specialist life insurers,” Mr Bascand says. A change of control of a licensed insurer is also not unusual. The Bank has considers a number of these applications each year.
We cannot be specific about how long the approval process may take, or when approval will happen, if it does. The time taken to make these deliberations reflects the quality of the information supplied by the insurer and the final form of the proposal. The law requires that the Bank provide a decision within twenty working days of receiving all of the information that it reasonably requires. AMP Life / Resolution have set out a preferred timetable for the transaction to complete by 30 June.
What is the Reserve Bank’s role in insurance supervision?
The Reserve Bank is responsible for the prudential regulation of insurers, which means our focus is on things like the financial solvency of insurers and the risk management policies and processes they use. This is to try and keep insurers safe and sound in order that they can meet their obligations and pay claimants out when required. We are governed by the criteria stipulated in the Insurance (Prudential Supervision) Act 2010.
Why aren’t you able to say more about the details of the sale?
The law requires the Reserve Bank to keep the information it receives (e.g. business plans, pricing, strategy, names of management and directors and their experience, and the terms of the transaction) and details of its own deliberations confidential. This means that we are legally restricted in what we can release publicly. This is important as it allows it us to interact candidly with the insurer and make our assessment judiciously, particularly while the process is ongoing and details may be changing.
Will the Reserve Bank approve the change of control if the Reserve Bank is not comfortable with it?
When will the Reserve Bank decide whether to approve the proposed sale or not?
We are unable to provide a definitive timeline. The law requires the Bank to provide a decision within twenty working days of receiving all of the information that is reasonably required. The time taken to make these deliberations reflects the Bank’s need for information, the quality of the information supplied by the insurer and the final form of the proposal by the Bank.
Who should policyholders speak to if they have more questions about the proposed sale?
We recommend that policyholders approach AMP Life directly for further information. We note that AMP has published some FAQs on its website, and wrote to policy holders on 11 March 2020.