Ipec developing new investment guidelines for life companies

The Insurance and Pensions Commission (Ipec) says it is developing a new investment guideline for life companies, considering the changes that have occurred since the last guideline was issued in 2013.

Ipec, in its half-year 2024 life assurance industry report, said it is essential to exercise prudence by ensuring that assets exceed liabilities in order to meet obligations as they arise.

“The Commission is currently developing a new investment guideline for life companies, considering the changes that have occurred since the last guideline was issued in 2013,” it said.

During the period under review, the life assurance sector had total assets of US$505.16 million, and the companies are mainly invested in equities and investment property, which accounts for over 60 percent of the total assets.

The Commission also said it expects sector players to comply with the required prescribed asset (PA) ratio on an ongoing basis and non-compliant entities are required to submit their compliance plans.

Ipec said the total investments in prescribed assets (PA) by the life assurance sector amounted to the US$ equivalent of US$46.99 million and that translated to a sector average compliance level of 9.3 percent for the period under review.

“Prescribed assets have over the years supported national economic development through projects of a developmental nature and several instruments have been accorded prescribed asset status through the Treasury.

“The life assurance sector is, therefore, encouraged to invest in bankable projects of national interest that align with Vision 2030 and create value for policyholders,” said the Commission.

During the period under review, life assurance businesses foreign currency revenue of US$42.94 million accounted for 68 percent of total revenue for the sector.

According to the report, Nyaradzo Life had the biggest share of forex business at 32 percent by virtue of having the largest market share within the life sector.

In terms of sector revenue, Nyaradzo Life and Doves Life are leading the life sector with a total market share of 56.2 percent, with the rest of the players sharing the remaining 43.8 percent of the market.

Ipec in the report said in order to support business growth, the industry should focus on creating products that align with the current business environment and evolving consumer preferences, among other factors.

“The need to diversify product concentration risk cannot be overemphasised,” reads the report.

In terms of assets, three entities dominate the market, with 72.58 percent of the life assurance sector, while the remaining entities hold the remainder of 27.42 percent.

Old Mutual has the biggest share of the market in terms of assets.

Ipec said life assurance companies are encouraged to maintain assets with appropriate duration and liquidity profiles that align with their liabilities, ensuring they can meet obligations as they arise.

In terms of Zimbabwe Gold currency (ZIG), direct life assurers reported insurance revenue of ZIG 850, 72 million, equivalent to US$63.09 million based on the average exchange rate for the period.

Funeral assurance and group life assurance business remain the two major drivers of insurance revenue for the life sector, which constituted a combined share of 86.04 percent of the total revenue.

Nyaradzo Life Assurance Company dominates the life sector, holding 41 percent of the market share, primarily due to its funeral assurance business.

The report shows that the top five companies collectively generated ZiG$689.90 million in revenue, equivalent to US$51.17 million based on the average interbank rate for the period.

In terms of insurance revenue by product, funeral assurance is the primary product in the life sector, contributing 69.36 percent of total revenue.

“This is followed by group life assurance, which accounts for 16.67 percent of total revenue. Other life products, including endowment, term assurance, and whole life, accounted for only 7.48 percent of the business.

Ipec said restoring confidence remains a central focus for the Commission, which is collaborating with the industry to revive interest in other long-term products.

“The industry must innovate to create products that meet market needs,” said the Commission.-ebsinessweekl