Willis Towers Watson (WTW) will carry out the first independent investment review of the circa $50 billion Accident Compensation Corporation (ACC), the government revealed last week, in a process first put in train well over a year ago.
Newly appointed ACC Minister Andrew Bayly said the investment review was one of two “commissioned” by the current government to assess the ongoing “viability” of the no-fault accident insurance scheme.
However, the fund itself initiated the independent investment review in 2023 before the National-led government came to power, targeting the first quarter of 2025 to table a report.
Unlike the NZ Superannuation Fund, the ACC fund is not subject to a regular statutory review but outgoing chief investment officer, Paul Dyer, said post the release of its 2023 annual report: “We’re doing this voluntarily because it is good investment practice.”
An ACC spokesperson confirmed the review is the same as the one announced last week by the government.
“This will be the first external assurance review of ACC’s investment function,” Bayly said. “Reviewing ACC’s investment performance now ensures we are getting the best returns from the fund and that it can support ACC’s sustainability.”
After succeeding long-time CIO, Nicholas Bagnall, in 2019, Dyer resigned last year with his formal exit slated to coincide with the release of the WTW report.
WTW will investigate five broad areas of the ACC fund including policies and procedures, performance, governance, responsible investment and operations, according to the terms of reference.
Among other factors, the review “should assess whether the frameworks for choosing between internal or external management of investment asset classes are ‘fit for purpose’ and are aligned with ACC’s legislative purpose and objectives” as well as costs.
In recent years, WTW has been the go-to firm for independent oversight of Crown Financial Institutions, winning the five-yearly statutory review gig at the NZ Superannuation Fund for the second time in succession as well as a similar role for the Government Superannuation Fund.
While the ACC fund has slightly missed its benchmark after fees over the last couple of years, it has outperformed in almost all other annual reporting periods since inception in 1992.
The fund also turned in a management expense ratio of 0.16 per cent last year against a target of 0.17 per cent, according to the 2024 annual report.
“This follows a long history of ensuring we continue to be a low-cost fund. For comparison, the average fees and expenses for KiwiSaver default providers was 0.43%, based on Melville Jessup Weaver’s October 2023 KiwiSaver Market Review,” the report says.
While the fund provides important financial ballast to the wider insurance scheme operations, the ACC reported a $7.2 billion deficit last year on the back of ballooning forecast operational costs.
The government named Australasian actuarial consulting firm, Finity, to carry out a review of the broader ACC operations.