Insurers miss key regulatory thresholds
CLOUDINE MATOLA
Life assurance and short-term insurance sectors have failed to meet critical regulatory requirements, Business Times can report.
According to the latest quarterly report from the Insurance and Pensions Commission (IPEC), both sectors remained below the minimum prescribed assets ratios for the nine months to September 30, 2025. Prescribed assets are investments mandated by the government in specific instruments, such as state bonds and infrastructure projects, to fund socio-economic development.
The life assurance sector’s compliance level reached just 9.18% against a statutory minimum of 15.5%. “The total investments in prescribed assets by the life assurance sector reached ZWG1.58bn, or US$59.13m. This results in an average compliance level of 9.18% during the review period, which is below the statutory minimum of 15.5%,” the commission stated.
The short-term insurance sector fared marginally better but still missed its target, with a compliance level of 9% against a required 10%. IPEC reported that “total investments in prescribed assets by short-term insurers amounted to ZWG455m , a 22% year-to-date increase from US$14.03m reported as at 31 December 2024.
The average prescribed assets compliance level stood at 9% against a minimum compliance level of 10%.”
The report reveals a stark disparity in compliance among individual firms. Within the life sector, only four entities—CBZ Life, Nhaka Life, Econet Life, and Fidelity Life—met the mandatory 15% ratio. IPEC noted it “anticipates that the sector will boost its investments in prescribed assets as more options become accessible,” but the widespread shortfall suggests deeper challenges.
The picture is similarly concerning for short-term insurers, where “prescribed assets constituted 6% of total assets. Only eight (8) out of the 21 insurers met the minimum prescribed asset ratio of 10%,” IPEC said, adding that companies “are encouraged to intensify their compliance efforts.”
The failure to meet these investment quotas comes despite most insurers appearing to satisfy separate, core solvency requirements. IPEC reported that nine life assurers met the US$2 million Minimum Capital Requirement (MCR), and eight short-term insurers met the US$1.5m MCR, “indicating a strong level of compliance within the industry, reflecting overall financial stability and adherence to regulatory standards.”
This divergence highlights a potential strategic reluctance or liquidity constraint preventing insurers from allocating more funds to prescribed state assets, even as they maintain regulatory capital buffers.
The commission issued a stern warning to those in breach, outlining a path of escalating consequences. “The commission will work collaboratively with those who do not meet the standard to support their recovery. If these efforts are unsuccessful, regulatory actions may be taken, including restricting dividend payments, suspending the ability to write new business, and ultimately revoking operating licenses,” the report stated.
Analysts suggest the shortfall could stem from a lack of suitable or attractive prescribed investment instruments, strategic portfolio choices prioritizing higher returns elsewhere, or underlying liquidity pressures within the sectors. The life assurance sector’s profit before tax saw a dramatic drop to US$63.09m during the period from US$309.82m a year earlier, which IPEC attributed to a “reduction in fair value adjustments which mirrors the stable operating environment.” This significant earnings volatility may further complicate asset allocation decisions.
The persistent non-compliance presents a dilemma for Harare. Prescribed assets are a “key resource mobilisation tool for funding government’s projects,” and widespread insurer failure to meet targets could pressure fiscal plans.
However, aggressive enforcement that destabilizes crucial financial institutions would be counterproductive.
IPEC now faces the delicate task of compelling greater investment in state projects without undermining the financial health of the very sectors it regulates.
