Finance

Insurance firms seek nod on USD products

TAURAI MANGUDHLA


Zimre Holdings Limited (ZHL) has made an application for
its insurance unit to charge premiums in foreign currency in a move likely to open floodgates for other players to seek the same barely a year after payment and or collecting premiums in foreign currency was banned.


The application was made through Credit Insurance Zimbabwe Limited.


Last year, the insurance regulator, Insurance and Pensions Commission
(IPEC) ordered players to stop selling US$ insurance products after government ditched the multicurrency regime and decreed the Zimbabwean dollar as the sole currency.


The travel and motor insurance classes were affected given the volatility of the local currency.


Ipec commissioner Grace Muradzikwa told Business Times yesterday that
applications are being made and the Commission is looking at them on a case by case basis with proof of free funds being fundamental.


“There is no general answer and applications are obviously made. We are
looking at whether the funds are free funds or not,” Muradzikwa said in a telephone interview yesterday.


The impending return of US$-linked insurance products comes as the

depreciating local currency has been depreciating against the greenback
necessitating demand for cover in hard currencies, ZHL company
secretary Lovemore Madzinga said a trading update for the first quarter
ended March 31.


“The industry is working with IPEC (Insurance and Pensions Commission) to reintroduce USD denominated policies following their suspension in 2019 (IPEC Circular 13 of 2019),” Madzinga said.


This comes after the ZHL’s property unit Zimre Property Investments Limited (ZPI) obtained a waiver to charge for some of its
services in hard currencies.


ZPI’s rental income performance for the period, the group said, was on
budget on account of the quarterly rental reviews being implemented,
reconfiguration of existing rental space for other uses in line with
market demand and move towards turnover based leases.


“The company remained profitable with sufficient cash flows
on account of the continued and calculated disposal of its stock of
residential stands, and the tight management of property operating
and administrative costs. Due to the hyperinflationary conditions
and the depreciating local currency, rental income declined in real terms
translating into weakened property values in real terms,” Madzinga said.
ZHL said its reinsurance operations started the year on a positive note with increased treaty participation especially from top tier cedants in the domestic market on account of a relatively strong balance sheet, excellent service delivery and the increasing Emeritus brand equity.


“Accordingly, the group expected both its domestic and regional
entities to contribute the bulk of its total income in 2020. However,
due to the tight liquidity situation and other challenges, premium
collections were subdued thus slowing down investment portfolio
growth across the group,” Madzinga added.
ZHL said its Credit Insurance Zimbabwe Limited (Credsure) recorded above budget performance in most key result areas as well as significant growth compared to the same period last year.


“The improvement is credited to its focus on offering specialised
products to the market especially to the tobacco sector and infrastructure
development projects through underwriting management agents.
In historical cost terms profit for the period was 439% above budget on
ccount of the significant growth in topline performance, favourable
claims experience (15% claims ratio) and controlled operating
expenses,” Madzinga said.


The group is leveraging heavily on its financial strength buttressed
by its size-able property portfolio to weather the effects of Covid-19
and preserve shareholder value, management has said The strategic focus for the group is responding to the effects of the Covid-19 pandemic and
implementing short-term survival strategies including balance sheet
preservation and cost control.
“The group is also putting in place measures to ensure the safety of its
employees and stakeholders without compromising the ease of doing
business,” Madzinga said.


ZHL said it was on course to achieve its performance targets for the year,
but the unexpected outbreak of the Covid-19 global pandemic in the last
part of the quarter with its negative impact on business performance
created a material uncertainty that would require extensive business restrategising for survival.
It said the outbreak of the Covid-19 pandemic which became more
pronounced globally towards the end of the first quarter resulted in
the downward revisions of global economic growth projections due to
the severe disruptions to economic activity.


With economic recovery expected to be slow and protracted more so
in developing economies where governments, in the absence of
assistance from international financial institutions, have limited
capacity to provide fiscal and monetary stimulus packages, ZHL
admits its resilience will be tested in the second half of 2020.

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