New Reserve Bank of New Zealand (RBNZ) variable annuity rules are close to sign-off with final responses to an exposure draft due last week.
First mooted last September, the RBNZ proposals would amend life insurance solvency standards to allow greater flexibility for variable annuity providers.
“The aim of the proposed capital treatment was to ensure that insurers offering variable annuity products are backed by appropriately prudent levels of capital while facilitating the establishment of a variable annuity market and thereby supporting innovation in the retirement income sector,” the RBNZ said after the first round of consulting with industry.
Variable annuity products, which feature a fixed life insurance-backed annual payment in conjunction with a further income component linked to investment performance, are common in other jurisdictions such as the US and Europe.
However, annuities in general have been a hard sell in New Zealand with the sole provider in that space, Fidelity Life, bowing out of the annuity market in 2013.
But at least one start-up provider, New Zealand Income Guarantee (NZIG), has a variable annuity product waiting in the wings.
Headed by former Axa NZ and Accident Compensation Commission chief, Ralph Stewart, NZIG is targeting the KiwiSaver market, which currently has no draw-down constraints once a member reaches official retirement age.
Stewart said NZIG has completed its regulatory preparations and was close to finalising capital-raising.
“We filed our offer documents with the Financial Markets Authority (FMA) last week,” he said.
Last December the RBNZ said its variable annuity regulations should be in place by the first quarter of 2015.