Covid-19 impacts insurance sector


The Covid-19 crisis has significantly impacted on Zimbabwe’s insurance sector amid serious supply chain and labour market disruptions, Insurance and Pensions Commission (IPEC) commissioner, Grace Muradzikwa said yesterday.

 “We have seen some waiver of contributions by employers in affected sectors, illiquidity due to declining contributions. Rental income arrears increased as well as reduction in cover,” Muradzikwa told IPEC’s annual meeting of shareholders that was held virtually.

Grace Muradzikwa

Hit by Covid-19, the local insurance companies accelerated digitisation of their operations.

This resulted in restructuring of key business functions.

“The use of technology resulted in operational efficiency,” Muradzikwa said.

She added: “(But) digitisation in retrenchments of some personnel. Some insurers offer premium holidays to clients in dire straits.”

 Muradzikwa said insurance companies’ gross premiums written, however, grew 384% to ZWL$13bn in 2020 from ZWL$2.69bn.

Total assets for the insurance sector grew 191% to ZWL$50bn from ZWL$17.19bn.

Muradzikwa said IPEC was working with insurance companies to improve the capital adequacy.

Last week, IPEC launched a new solvency regime for the insurance sector, meant to improve the safety and soundness of the country’s insurance companies.

The new framework, the Zimbabwe Integrated Capital and Risk Programme (ZICARP), is also meant to enhance protection for policyholders.

 It will also capacitate insurers to withstand any risk they get exposed to as it requires that local insurers have capital aligned to the risk they carry.

Currently, local insurers have a one size fits all regulatory capital requirement, regardless of their size and nature.

Life assurers were required to hold a minimum capital threshold of ZWL$75m, short-term assurers ZWL$37.5m, and funeral assurers ZWL$62.50m.

The industry regulator wants the sector to move away from an unscientific determined capital to one which is related to risks insurers carry under ZICARP.

This means there will be a need to understand each insurer’s business line and products and identify risks in those activities and assess the quality of risk management, day to day management and oversight.

Basically, it means that the new risk framework aims to address weaknesses of the current capital regime which unscientifically determine the minimum capital thresholds of insurance companies.

Analysts said the new framework will be responsive to market dynamics.

ZICARP also forms part of an early warning system with a supervisory ladder of intervention that enables IPEC to timely take necessary measures in the interest of policyholders.

The framework also enables orderly exit of insolvent insurance companies from the market and improves confidence in the insurance sector. It also promotes standardisation across the country’s insurance market and alignment to international regimes.

The new framework considers the overall solvency needs taking into account the specific risk profile, approved risk tolerance limits and the business strategy undertaking.

Consequently, IPEC is implementing Circular 11 of 2016, which requires an effective risk management system to be put in place. It outlines the governance and risk management requirements for insurance companies.

The circular constitutes key pillar 2 of the ZICARP requirements including the establishment of actuarial functions, internal audit functions and documentation of key risk management framework and policies within insurance companies.

ZICARP will ensure that insurance companies will have sufficient capital to meet obligations.

 Muradzikwa said ZICARP will reduce operational surprises and losses.

ZICARP will also align local insurance practices with international   best practice.

She said insurance companies have been directed to do parallel runs of ZICARP in this second and third quarter.

She said the insurance firms would then be required to submit ZICARP reports in 2022 onwards.

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