BY TAFADZWA MHLANGA
FINANCE minister Mthuli Ncube has reviewed upwards the minimum capital requirements for insurance entities to $75 million to ensure that they are well-capitalised to protect value for policyholders and pension members.
In a budget presentation on Friday, Ncube said the minimum capital requirements for short-term and funeral insurance entities will be reviewed to $37,5m from $2,5m, life assurance and re-insurance to $75m from $5m and micro-insurance to $4,5m from $0,3m with immediate effect.
“The obtaining macro-economic environment has necessitated upward review of minimum capital requirements for different players in the insurance industry to ensure that entities are well-capitalised for the protection of value for policyholders and pension members,” Ncube said.
Meanwhile, Zimbabwe’s insurance and pensions regulator, Insurance and Pensions Commission (Ipec) is developing a risk-based capital framework called the Zimbabwe Integrated Capital and Risk Project (Zicarp), which will be launched in 2020.
The programme seeks to improve the regulator’s oversight of the industry focusing on compliance based on risks associated with insurance firms shifting from assessing solvency using capital threshold.
The initiative, running under the theme Treating Customer Fairly and Market Disclosure Framework, aims to improve conduct of business in the industry.
Currently, lack of confidence continues to haunt the country’s insurance and pensions industry following the erosion of policyholder accounts due to the conversion of value from Zimbabwean dollar to the United States dollar during the February 2009 period.
A survey conducted recently by African Actuarial Consultants under Zicarp, spearheaded by Ipec, showed that at least 62% of Zimbabwe’s insurance firms do not have software to analyse and debunk risks associated with their business.
Certain entities did not have documented framework for managing underwriting risk.
The survey also revealed that only 54% firms had documented policies and procedure manuals for managing material risk and 42% partially had, suggesting that the industry had challenges in implementing good corporate governance.
The survey was aimed at bringing about transition from capital threshold compliance to a more integrated framework that looks at credit, strategic, operational and insurance risks associated with insurance companies.