IPEC engages industry

PHILLIMON MHLANGA

The Insurance and Pensions Commission (IPEC) this week engaged industry players  to unpack the draft Own Risk and Solvency Assessment (ORSA) framework drafted by the sector regulator to strengthen a new solvency framework called the Zimbabwe Integrated Capital and Risk Project (ZICARP).

The implementation of ZICARP, analysts say 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.

Now, 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 which entails the establishment of actuarial functions, internal audit functions and documentation of key risk management framework and policies  within insurance companies.

“The Commission is pleased with significant progress towards implementation of the requirements of Circular 11 of 2016 noted during our normal supervisory and monitoring activities,” IPEC Commissioner, Grace Muradzikwa said at a virtual meeting held this week.

She added: “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.

“To strengthen Circular 11 of 2016 which constitutes Pillar 2 of the ZICARP framework, the Commission drafted ORSA framework.”

Muradzikwa has given the players in the sector to submit their comments on how to improve ORSA framework  before the end of the week.

“ As alluded to before, participants are implored to submit their comments during this workshop or in written form to the Commission no later than the March 19, 2021.

The Commission will consider all the comments and update the draft ORSA framework accordingly .The Commission’s actuarial team and our consultant, the African Actuarial Consultants (AAC) are also ready to have discussions with individual participants on the draft framework outside this workshop to ensure inclusivity in terms of comments,” Muradzikwa said.

Tinashe Mashoko of AAC also unpacked the draft ORSA framework, which is an internal  risk assessment process. It compels senior management to  a review of risks and ensures that  the insurer holds sufficient capital against those risks.

He implored insurers to regularly undertake  ORSA and it must be an integral part of business strategy.

“ORSA must be performed regularly as it is a fundamental part of  of the risk management system of an insurer. It forms part of the supervisory process,”Mashoko said.