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EY 11: Superannuation schemes providing life insurance
or “Rules for superannuation schemes that offer life insurance-like benefits”
You could also call this:

“Definition of life reinsurance in insurance contracts”

Life reinsurance is a contract between a life insurer and another person (called person C) that protects the life insurer against risk. This contract can fully or partially secure the life insurer against life risk, but not financial risk unless it’s a small part of securing against life risk. It can’t be part of a plan to avoid taxes.

When we say ‘fully’ or ‘partially’, we’re talking about how much the life insurer is protected against life risk, not how long the reinsurance lasts.

Full reinsurance happens when the life insurer has reinsurance policies that cover all their life insurance policies and fully protect them from liability. These policies must be offered or entered into in New Zealand.

Partial reinsurance is when the life insurer has reinsurance policies that either fully cover some (but not all) of their life insurance policies, or partially cover all or some of their life insurance policies. These reinsurance policies must also be offered or entered into in New Zealand.

Contracts that are financial arrangements or insurance against events other than death or survival of a person are not considered life reinsurance.

There are also some special terms you should know:

  • Life financial reinsurance is a contract that could be life reinsurance but isn’t included because of certain rules.
  • Financial risk is about things like the value of financial arrangements, how profitable something is, or future spending. It doesn’t include life risk.
  • A life reinsurer is the person in the position of person C.

Remember, there’s a special rule in Section EZ 62 that can change how this all works for life financial reinsurance.

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Next up: EY 13: Meaning of life reinsurance policy

or “Definition of a life reinsurance policy”
Next

Part E Timing and quantifying rules
Life insurance rules

EY 12Meaning of life reinsurance

  1. Life reinsurance—

  2. means a contract of insurance between a life insurer and another person (person C) under which the life insurer is secured, fully or partially, against a risk by person C:
    1. does not include a contract that—
      1. secures against financial risk unless, in the contract, it is incidental to securing against life risk:
        1. is, or is part of, a tax avoidance arrangement.

        2. The words fully and partially describe the extent to which the life insurer is secured against life risk; they do not describe the term for which the reinsurance is provided.

        3. The life insurer has full reinsurance if all the following apply:

        4. the life insurer offered or was offered or entered into a life insurance policy or policies,—
          1. in the case of a life insurer resident in New Zealand, as part of their business of providing life insurance; or
            1. in the case of a life insurer not resident in New Zealand, as part of their New Zealand business; and
            2. the life insurer holds a life reinsurance policy or policies covering every life insurance policy described in paragraph (a); and
              1. the life insurer is fully secured against liability under the life insurance policy or policies by the life reinsurance policy or policies; and
                1. the life insurer offered or was offered or entered into the life reinsurance policy or policies in New Zealand.

                  1. The life insurer has partial reinsurance if all the following apply:

                  2. the life insurer—
                    1. holds a life reinsurance policy or policies fully securing them against liability for 1 or some, but not all, of the life insurance policies described in paragraph (b); or
                      1. holds a life reinsurance policy or policies for all the life insurance policies described in paragraph (b) but only partially securing them against liability; or
                        1. holds a life reinsurance policy or policies partially securing them against liability for 1 or some, but not all, of the life insurance policies described in paragraph (b); and
                        2. the life insurer offered or was offered or entered into the life insurance policy or policies covered by the life reinsurance policy or policies,—
                          1. in the case of a life insurer resident in New Zealand, as part of their business of providing life insurance; or
                            1. in the case of a life insurer not resident in New Zealand, as part of their New Zealand business; and
                            2. the life insurer offered or was offered or entered into the life reinsurance policy or policies in New Zealand.

                              1. To the extent to which a contract is a financial arrangement or is insurance that secures a life insurer against liability that arises from insurable events other than death or survival of a human being, that contract is not life reinsurance.

                              2. In this Act,—

                                life financial reinsurance is a contract that may be life reinsurance under subsection (1)(a), but is not included under subsection (1)(b)

                                  financial risk—

                                  1. means risk, whether or not specific to a party to the relevant arrangement relating to risk, that is contingent on a valuation or disposal of financial arrangements, or contingent on profitability or creditworthiness, or contingent on a variable such as future expenditure:
                                    1. does not include life risk

                                      life reinsurer means a person in the position of person C.

                                      1. Section EZ 62 (Reinsurance transition: life financial reinsurance may be life reinsurance) overrides this section.

                                      Compare
                                      Notes
                                      • Section EY 12(1) heading: substituted, on , by section 189(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(1): substituted, on , by section 189(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(1B) heading: inserted, on , by section 189(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(1B): inserted, on , by section 189(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(4) heading: substituted, on , by section 189(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(4): substituted, on , by section 189(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(5) heading: added, on , by section 189(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(5): added, on , by section 189(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(6) heading: added, on , by section 189(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12(6): added, on , by section 189(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12 list of defined terms financial arrangement: inserted, on , by section 189(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12 list of defined terms financial risk: inserted, on , by section 189(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                                      • Section EY 12 list of defined terms life financial reinsurance: inserted, on , by section 189(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).