Insurers need more capital: Wilson

An increase in capital requirements for insurance companies in Australia has caused an upheaval in the sector, causing some banks in particular to offload their life insurance arms.

In New Zealand, a review is currently under way of the Insurance (Prudential Supervision) Act, which includes the capital provisions. It has been predicted that any increase in the requirements could put significant pressure on insurers’ ability to get a good rate of return on their capital.

But Mark Wilson, chief executive of Aviva and former chief executive of AIA, said New Zealand’s insurance market was immature and the capitalisation requirements were “not that strong”. “Consumer protections are not particularly strong as well.”

He said compared to other parts of the world, it was easy to set up an insurance business in New Zealand. This country had some of the weakest capital requirements, he said. “It needs review. There need to be stronger capitalisation standards.”