Funeral assurers urged to comply with prescribed asset requirements
THE Insurance and Pensions Commission (Ipec), has stressed the need for all funeral assurers to stick to prudent investment practices by consistently holding assets that match their liability profiles at a time when the Commission is concerned by the continued non-compliance with prescribed asset requirements.
Only two entities submitted compliance roadmaps, Ipec said in its 2023 third quarter funeral assurers report.
The sectors consist of Moonlight, First Funeral, Ruvimbo, Vineyard, Foundation, Sunset and Orchid.
According to the report, Ipec said the asset base for the sector remained highly concentrated in operational properties, which constituted 60,38 percent of the total assets as at September 30, 2023.
“Total assets for the funeral assurance sector amounted to $30,81 billion as at 30 September 2023, an increase of 23,13 percent from $25,02 billion reported as at 30 June 2023.
“The asset base for the sector remained highly concentrated in operational properties, which constituted 60,38 percent of the total assets as at 30 September 2023,” reads part of the report.
Ipec is a statutory body mandated to regulate, supervise and develop the insurance and pensions industry, for the protection of policyholders and pension scheme members in Zimbabwe.
The regulatory body noted that the concentration in operational properties mainly arose from the need by the sector to invest in assets used for funeral service provision.
Therefore, the Commission called for prudent investment practices by funeral assurers, considering the need to continuously hold assets that match their liability profiles.
“The sector continues to hold investments in equities, cash and money market instruments in very small proportions relative to the overall asset portfolio, a trend that has persisted for more than four consecutive quarters.
“The Commission also reminds all funeral underwriters of the need to uphold the choice of the policyholder at the claim stage, to receive a cash benefit or funeral services as enshrined under Section 58(3)(a) of the Insurance Act [Chapter 24:07] and Circular 12 of 2023 on the Funeral Directive.
“Furthermore, funeral assurance players are required to always adhere to the requirement of Section 29 of the Insurance Act [Chapter 24:07] by maintaining separate Policyholders’ and Shareholders’ accounts.”
As at 30 September 2023, all Funeral Assurers were non-compliant with the minimum Prescribed Asset ratio of 10 percent, as stipulated by Statutory Instrument 206 of 2019, Ipec said.
“Prescribed asset investments were very low as they accounted for an average of only 0,18 percent of the total sector asset portfolio.
“The Commission is concerned by the continued non-compliance with prescribed asset requirements.
“Only two entities submitted compliance roadmaps, which are under consideration while the remaining five players are yet to submit roadmaps in line with S.I 206 of 2019.”
According to the report, the total investments in prescribed assets were $55,54 million against an expected minimum amount of $3,08 billion for the sector to be compliant with the 10 percent minimum prescribed asset threshold.
With Gold Coins having been introduced in 2022 and accorded prescribed asset status, the commission expects compliance ratios to improve.
“Whilst the commission has perennially called for the development of sector-specific projects for possible conferment of prescribed asset status to no avail, the commission will resort to implementing the intervention ladder to cause compliance.”
Ipec further indicated that all funeral assurers had no reassurance arrangements in place during the nine months ended 30 September 2023.
“The commission is concerned by the continued lack of reassurance arrangements in the sector despite several commitments by the funeral assurance players.
“The sector is urged to consider reassurance as a prudent risk management practice in the event of catastrophes.”
In the period under review, two players dominated the funeral assurance sector with a total market share of 86,72 percent.
Moonlight had 50.02 percent while First Funeral controlled 28,70 percent. The remaining five funeral assurers accounted for the 13,28 percent difference.
On earnings, all the seven funeral assurers reported positive profits before interest and tax.
The funeral assurance sector reported a nominal increase of 436,91 percent in profit before interest and tax from $712,19 million for the comparative nine months ended 30 September 2022 to $3,82 billion for the nine months ended 30 September 2023.
-chrnicle
