The Financial Markets Authority (FMA) has provided further guidance for insurers, KiwiSaver scheme providers and fund managers during the COVID-19 crisis.
This publication supplements and updates our Brief Counsel of 30 April.
Expectations for insurers during COVID-19
The FMA has written to the Insurance Council, the Financial Services Council and the Health Funds Association to provide further guidance on its expectations of how insurers will manage their customer relations during the COVID-19 crisis. It has outlined ‘model’ and ‘ideal’ behaviours to proactively address changing circumstances, maintain regular communications with all clients, and put client interests first.
For example, the FMA is encouraging all insurers to ensure all offers of customer relief (including payment holidays) and any COVID-19 policy exclusions are clearly explained to distributors and customers. The FMA expects advanced warnings to be given where premium increases above CPI inflation are being planned or enacted, and additional options to be provided to clients who are facing affordability issues.
Insurers are also encouraged to actively monitor existing complaint processes, ensuring that they are fit-for-purpose and that all complaints are managed genuinely, promptly, fairly and consistently.
‘No action’ relief for KiwiSaver Annual Statistical Returns
The FMA will not take action against KiwiSaver providers if they miss their 31 May reporting date for filing their KiwiSaver Annual Statistical returns, provided they file them by 30 June 2020.
Although offering the month long extension, the FMA would appreciate it if schemes were able to submit their returns on time as this would assist it in preparing its KiwiSaver Annual Report to Parliament.
Further guidance for Managed Investment Scheme managers, including SIPO Limit Break Reporting FAQs
In response to the industry’s request for guidance in dealing with high equity market volatility, the FMA has published FAQs to explain which statement of investment policy and objective (SIPO) limit breaks should be considered a material breach (and therefore reported). The FAQs reinforce the message that remedying limit breaks within the five day period or amending SIPOs should not be driven by a desire to avoid the requirement to report a limit break.
They also lay out the FMA’s expectations on reporting requirements for active limit breaks vs those which are passive (i.e. caused by market movements) and on what Managed Investment Scheme (MIS) managers should do in terms of taking corrective action to get back within SIPO limits, and provide specific guidance on changing SIPO limits and the FMA’s view on when SIPO changes should be notified to current investors.
The FAQs for MIS managers have also been updated to include additional information on management fees, disclosure around the number of managed investment products, and various other practical roadblocks which may have been created by COVID-19.
Chapman Tripp comment
The extension of the ‘no action’ relief and the new guidance will provide reassurance and comfort for KiwiSaver scheme providers and other fund managers.
We note, however, that the FMA’s guidance indicates that SIPO changes should be notified to current investors, which is a gloss on the statutory requirement for the changes to be lodged on the Disclose Register and for material changes to be notified in a scheme’s next annual report. Issuers will also need to bear in mind the relevant Trust Deed provisions and any other requirements in the Product Disclosure Statement.
Also, while the recommendations laid out in the FMA’s ‘Insurer COVID-19 Expectations’ letter to insurer bodies are proper and appropriate, it is worth noting that in the absence of direct regulatory requirements, they are aimed at encouraging proactive behaviour and encouraging industry members to work together to identify and share best practice.
We will continue to monitor developments and keep you informed.
This is one of a series of Brief Counsels Chapman Tripp has produced on COVID-19. See the full list of COVID-19 releases here.
FMA: Letter to the insurance industry
FMA: ‘No action’ relief as a result of COVID-19
FMA: Fund Manager and SIPO Limit Break Reporting FAQs