Five insurance brokers have violated their reporting obligations by failing to provide their financial data for the third quarter of 2019 to the Insurance and Pensions Commission (IPEC) within the stipulated timeframe.
The development means IPEC’s third quarter reports were compromised. Brokers that violated their reporting obligations are Auto and General Insurance Brokers, Hostcare, Rainbow, Revival and Capitol. The reports are critical in apprising the regulator and other stakeholders of the financial condition of the brokers in the country.
Zimbabwe has 31 registered insurance brokers. Of these 24 are registered with the Brokers Association of Zimbabwe. Their failure forced IPEC to use half year results in their third quarter reports, something which is unacceptable. The requirement ensures that stakeholders are provided with timely, accurate and reliable reports on a periodic basis.
Brokers play a critical role in the sector. They facilitate the placement and purchase of insurance, and provide services to insurance companies and consumers that complement the insurance placement process. They provide advice on developments in the insurance market. They negotiate with insurers on the client’s behalf. They act on client’s behalf. They also collect and remit premiums.
IPEC raised concerns that failure to capture their reports affected its reports.
“The reported figures for Auto and General insurance Brokers, Hostcare Insurance Brokers, Rainbow Insurance Brokers, Revival Insurance Brokers, and Capitol Reinsurance Brokers are based on their half year return, as they failed to submit their third quarter figures to the Commission,” IPEC said.
The regulator warned the brokers saying punitive action would be taken against the institutions.
“In future companies that fail to submit their returns within the stipulated timeframe will be excluded from the report and punitive regulatory action will be taken against the institutions.”
Insurance brokers wrote ZWL$268,7m worth of business in the third quarter to September 2019, representing a 212,12% increase in business written from ZWL$86,08m reported in the third quarter of 2018. They recorded ZWL$45.22m in brokerage commission. This translated to an industry average commission of 17%. The brokers paid 11% of their brokerage income to their intermediaries.
During the period under review, about 97% of insurance brokers had net assets in excess of ZWL$100,000, the regulatory capital threshold. Only one insurance broker, Rainbow Insurance Brokers, was undercapitalised. It reported regulatory capital position of 15,551, which was less than the required ZWL$100,000.
The capital positions for the lowest and highest insurance brokers ranged from ZWL$15,551 to ZWL$6,911,038 respectively. Insurance brokers reported a 551% increase in total profit after tax from ZWL$2.47m for the period ended 30 September 2018 to ZWL$16.08m for the current period under review.
This marked increase in premium written emanated from the currency reforms which took place since October 2018. The industry average on return on equity and return on assets for the reporting period were 39.48% and 14.09% respectively.
Mapiye Chigorondondo, Brokers Association of Zimbabwe public relations and marketing chairperson, said the sub sector faces a cocktail of challenges.
“The sector is faced with plethora of challenges including volatile economic environment, high cost structure, lack of resources, lack of appetite to buy insurance and fraudulent claims especially when times are hard,” he said.