PHILLIMON MHLANGA
The Insurance and Pensions Commission (IPEC) has instructed all insurance companies to conduct dry runs for the new solvency framework as the insurance regulator moves to ensure sector players are on track to implement the new regime.
IPEC will soon implement the Zimbabwe Integrated Capital and Risk Project (ZICARP) and had asked insurance firms to submit the dry runs results to IPEC by end of last month.
However, the IPEC commissioner, Grace Muradzikwa, revealed that the response from insurance players has been unimpressive.
“The Commission requested from the industry the quantitative dry run results for each insurance company based on the proposed ZICARP Pillar 1 frameworks. The submissions to date have not been very impressive as some institutions submitted none of the requested information,” Muradzikwa said.
IPEC has also been engaging industry players to unpack the draft Own Risk and Solvency Assessment (ORSA) framework, drafted by the sector regulator to strengthen ZICARP.
The implementation of ZICARP will see local insurance companies have capital aligned to the risks they carry.
ZICARP is expected to ensure that insurers can withstand any risk it is exposed to and ultimately enhancing protection for policyholders.
Currently, insurers have a one-size-fits-all regulatory capital requirement, regardless of their size and nature.
The question, however, is what informed these capital thresholds.
IPEC want the sector to move away from an unscientific determined capital to one which is related to risks insurers carry under ZICARP.
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.
At a recent virtual meeting, Muradzikwa said the Commission was pleased with significant progress towards implementation of the requirements of Circular 11 of 2016 noted during our normal supervisory and monitoring activities.
“We have noted progress on establishment of actuarial functions, internal audit functions and documentation of key risk management framework and policies within insurance companies. This will go a long way in improving the risk management systems and processes within the industry, culminating in improved investor and policyholders’ confidence,” Muradzikwa said.
