IPEC warns of dip in investments income, contributions, cover

INSURANCE and pensions industry players have warned of a dip in investments income, pension contributions and cover as the 21-day COVID-19 national lockdown impacts on business.

BY LORRAINE MUROMO

The Insurance and Pensions Commission (IPEC), however, directed the industry to activate business continuity plans to ensure insurance claims and pension benefits are processed during the national lockdown.

In a statement, Insurance Pensions and Provident Funds commissioner Grace Muradzikwa said the real estate industry was already feeling the pinch of the 21-day lockdown.

“There has been a huge reduction in investment income from real estate. As you may be aware, the insurance and pensions industry controls about 80% of commercial real estate in most urban and peri-urban centres,” she said.

“To date, 70% of the industry’s assets are invested in real estate. Given the closure of businesses during the lockdown and its impact on business, the industry is anticipating a serious reduction in investment income as tenants fail to pay rentals on account of business closure.

“We have already had submissions from some of the pensions funds citing the impact on rentals and calling for pensioners to be treated as a vulnerable group eligible for support.”

Muradzikwa said the COVID-19 pandemic had affected the labour market, which has a bearing on pension contributions in the short-to-medium term.

“Pensioners are directly and indirectly affected as the pandemic is negatively affecting investment return,” she said.

“The situation has been exacerbated by inflation developments, as the year-on-year inflation for March 2020 stood at 676%.”

The sector, Muradzikwa added, faces “some reduced revenues as policyholders reduce covers as a response to the reduced economic activity during the lockdown period.”

Muradzikwa revealed that insurance companies might face claims from policyholders with business interruption policies.

She added: “… the pandemic has exposed gaps in cover as indications are that most business operators do not have cover for business interruption covering pandemics.”

Muradzikwa urged government to designate the insurance and pensions industry as an essential service and consider pensioners as vulnerable groups under the Social Protection and Cash Transfer facility.

“The measure will help to augment pensioners’ income and prepare them to respond better to the impact of COVID-19 and inflation. The disbursement of allowances to pensioners can be easily co-ordinated through their respective pension funds,” she said.

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