The Insurance Companies Deposits Act 1995: A Legal audit

Abstract

The Insurance Companies' Deposits Act 1953 aims to provide security for policyholders who may have claims against an insurer. It attempts to protect the insured from insurer insolvency, and is thus a method of insurance company regulation. The Government recently reviewed the regulatory regime in New Zealand. A report to the Minister of Justice in late 1992 recommended that the Deposits Act's requirement of deposits with the Public Trustee be discontinued in favour of a rating system. The rating system would provide information to the public on the ability of an insurer to meet its liabilities. The Insurance Companies (Ratings and Inspections) Act 1994 is the result. Insurance companies must now have a current rating, from an approved rating agency, of their claims paying ability. Despite the Brash report's recommendation, the Ratings Act did not repeal the Deposits Act. Instead it provides that the Minister of Justice shall appoint someone to review the operation of Part I of the Ratings Act and at the same time review the Deposits Act. The review will take place two years after the first approval of an approved rating agency. It is the view of the author of the present article that the Deposits Act should not be repealed and that the review should cover also the Life Insurance Act 1908.