Zim’s risk-based insurance reform

For years, Zimbabwe’s insurance sector has operated under a one-size-fits-all capital requirement, treating low-risk and high-risk insurers alike.

But the Zimbabwe Integrated Capital and Risk Programme (ZICARP), a risk-based solvency framework designed to bring the country’s regulatory system in line with international best practices, has flipped the tables.

Zimbabwe’s experience with ZICARP is making waves; it is the only African case study featured in a recent report by the International Association of Insurance Supervisors (IAIS).

ZICARP is one of 13 global case studies in the IAIS publication, which offers practical insights for countries shifting to risk-based solvency models.

The publication provides practical insights on the risk-based solvency processes given experiences from other markets and is available to the 222 IAIS members.

The ZICARP framework addresses challenges with rule-based supervision.

Previously, the local insurance sector had uniform capital requirements for all insurers.

However, the risk-based approach ensures that capital is calculated according to the risk that a particular insurer is carrying.

This means an insurer’s capital levels must be commensurate with the risk they carry.

The IAIS report also highlighted how Zimbabwe’s insurance regulator, the Insurance and Pensions Commission (IPEC), has progressively enhanced its capacities in line with the requirements of the new prudential supervision framework.

“Given the limited actuarial skills at the commission at the start of the journey, the Commission outsourced the development of ZICARP to an actuarial consulting firm.

“However, contractual arrangements were put in place to ensure that there would be skills transferred to the in-house staff,” reads part of the report.

“During the development process, the Commission also enhanced its capacity to handle the project by recruiting additional staff.”

Zimbabwe has also initiated a review of the relevant legislation, the Insurance Act (Chapter 24:07), which was enacted in 1988, to facilitate the implementation of ZICARP.

“To ensure enforceability of the new framework, the Commission, with the support of appropriate Government authorities drafted an omnibus regulation covering all the three pillars of ZICARP,” says the IAIS report.

“This omnibus regulation will repeal existing regulation/guidelines on the solvency of insurance companies operating in Zimbabwe.”

The regulator has also been working on an initiative to index the insurance sector’s minimum capital requirements to the United States dollar.-herald