The Reserve Bank of New Zealand (RBNZ) has issued a rare public warning to Quest Insurance Group Limited for breaches of financial rules. This warning serves as a reminder to the entire insurance industry about the critical importance of compliance with financial regulations.
RBNZ found out that Quest Insurance Group Limited, a subsidiary of the Geneva Finance Group, had prolonged failures to maintain the required minimum solvency margin for its non-life insurance operations and did not manage a statutory reserve fund for its life insurance business.
Insurers are required to maintain adequate financial reserves to cover potential claims as a prerequisite for obtaining and retaining their license.
The breaches were of a technical nature, which the company self-reported and has since resolved, stated Kerry Beaumont, director of enforcement and resolution at the RBNZ.
The company acknowledged the violations that occurred in 2021 and 2022; the RBNZ’s investigation revealed that the company had inaccurately reported a positive margin for certain insurance products while actually being in deficit. Additionally, the company incorrectly asserted that it was exempt from maintaining a special fund for other products.
“At all times they were able to pay their policyholders. [But] we never want to see non-compliance among our insurers, and that’s why we’re issuing this warning,” Beaumont remarked.
Beaumont also stated that the warning serves as a reminder to the insurance industry that effective risk management and strong governance are crucial for safeguarding policyholders and that insurers are expected to maintain compliance at all times.
If brought to court, the breaches could have incurred fines of up to $500,000 for each violation.