One out of the eight local funeral assurers is compliant with the regulatory minimum capital threshold amid fears the players could face difficulties in fulfilling policyholders’ obligations.
Statutory Instrument 59 of 2020, promulgated by the government early this year, compels insurers that issue funeral policies to hold ZWL$62.5m from ZWL$5m.
Other insurers that carry out life assurance business are required to hold ZWL$75m.
Those that provide non-life insurance business should hold ZWL$37.5m from ZWL$2.5m.
But, only one funeral assurer complies with the regulatory threshold.
The Insurance and Pensions Commission director of insurance, Sibongile Siwela, said the failure by funeral assurers to comply with the law was worrisome.
She, however, refused to disclose those that are not compliant with the regulatory threshold.
“The industry is actually in breach. Out of the eight funeral assurers that submitted their returns, only one complied with the minimum capital requirement,” Siwela said.
Analysts told Business Times this week that funeral assurers that are struggling to meet the threshold could down grade their licences to micro insurance which requires a lower capital threshold.
Recently, Finance and Economic Development Minister, Mthuli Ncube, said it was important to ensure that insurers are well capitalised to protect value for policyholders and pension members.
“The obtaining macroeconomic environment has necessitated upward review of minimum capital requirements for players in the insurance industry to ensure that entities are well-capitalised for the protection of value for policyholders and pension members,” he said at the time.
Total assets for the industry stood at ZWL$56bn as at June 30, 2020. Out of this, funeral insurers had ZWL$606m at the end of June.
Funeral assurers continue to experience mounting threats from life assurers who are now writing more than 90% of funeral business in Zimbabwe.
This has left traditional funeral assurers in a precarious position.
They are now struggling to stay afloat as their ability to write business is adversely affected.
During the first quarter of this year, life assurers wrote funeral assurance business worth ZWL$39.27m.
Of that traditional funeral assurers wrote ZWL$2.83m (6.73%) of the business. “We have bigger muscle and we give value as well,” Life Offices Association secretary general, Mavukeni Rufai, told Business Times recently when asked how they have wrestled business from funeral insurers.
“A lot of our members are big companies that underwrite such products as funerals.
Apart from that, our members (life assurers) have a sales team, advisors and more than 2,000 agents.”