By Lucy Craymer
WELLINGTON (Reuters) - Reserve Bank of New Zealand said on Tuesday that its first life insurance industry stress test showed large insurers are well placed to withstand severe economic and insurance shocks, while continuing to pay out on policy claims.
"Participating insurers were able to pay out substantial claims from policy holders and remain solvent during a hypothetical three-year scenario which included long COVID, a new pandemic and a period of severe economic stress,” RBNZ Deputy Governor Christian Hawkesby said in a statement.
He added that stress tests play an important role in helping build understanding of how particular risks may impact financial stability as well as building capability across industry to manage these risks.
The RBNZ noted that under the tests all the insurers were able to remain solvent but that the combined effects of the scenario caused the solvency margin of some insurers own risk appetite and trigger mitigating actions.
The RBNZ will now undertake stress tests on the life insurance industry annually.