Low compliance blights insurance, pensions sectors
Zimbabwe’s insurance and pensions sector players could be exposing themselves to greater vulnerabilities by failing to comply with set regulations guiding the sector.
This is especially so insofar as their operating environment has been impacted — largely negatively — by inflationary pressures, and more broadly by Covid-19.
Local players in this sector already have experience of how a challenging operating environment can affect their business.
Following the value erosion that took place circa 2008 due to hyperinflation, Government assigned the Justice Smith Commission of Inquiry to look into the matter.
One of the key highlights of the report was that the insurance and pension industry was not effectively regulated over the period from 1996 to 2014.
The sector regulator — the Insurance and Pensions Commission (IPEC) — was charged with failing to intervene in order to correct market failures and guide the industry and thus resulted in failure by the industry to institute financially sound systems and procedures.
It’s an area that IPEC has moved to address in recent years, especially after the re-emergence of inflationary pressures in the last couple of years.
From 2019 to date, the insurance and pensions regulator issued 10 circulars covering a number of regulatory issues to the market, as well as developing six supervisory frameworks, manuals and policies.
But despite IPEC’s efforts, there is still a high level of non-compliance to standard statutory prerequisites such as minimum capital requirements.
Various sector reports for the second quarter to June 30, 2020 show generally poor compliance levels within the sector.
“For the six months ended June 30, 2020, nine out of 12 life assurance companies and one of the four life reassurance companies reported capital positions which were in compliance with the prescribed minimum capital requirements of $75 million and $112.5 million, respectively,” highlighted IPEC in its latest life assurance sector report.
On the other hand, the pensions sector is doing its role to contribute to poor compliance.-ebusinessweekly.co.zw
