PHILLIMON MHLANGA
Players in the insurance and pensions sector are not happy with the current procurement policy and practice that excludes them from providing guarantees to project tenders for government and the private sector, Business Times can report.
They said the insurance security is not inferior to bank guarantees.
“The insurance and pension sector is missing out in action as far as guarantees on tenders are concerned. It should not be the case to say insurance guarantees are inferior security to bank guarantees,” said commissioner of the Insurance and Pensions Commission Grace Muradzikwa.
“We are saying the insurance guarantees are as good as bank guarantees. We are not happy that the sector has been excluded.”
Finance and Economic Development Minister, Mthuli Ncube said players in the insurance sector should be ‘innovative’.
“The (insurance and pensions) sector should be innovative. One area the sector has been missing out in action is that of performance bonds or guarantees for projects. Most of these guarantees are currently coming from banks,” Ncube said.
All efforts to get a comment from Procurement Regulatory Authority of Zimbabwe CEO, Clever Ruswa were futile.
The push by the insurance and pensions sector comes at a time when banks are the dominant players in the country in guaranteeing project tenders through what is known as performing bonds or contract bond.
The bond is a financial surety guarantee typically provided by financial institutions such as banks and insurance companies to ensure the completion of projects.
It is a collateral for some borrowers.
It ensures that the contractor will deliver performance specified in the agreement.
This is also used to denote a collateral deposit of good faith. It guarantees the project owner that the project will be completed, even if the current contractor fails.
The value of the bond should not exceed 5% of the value of the project.
Zimbabwe’s insurance companies are cash-rich and can contribute significantly to the development of the country.
Business Times can report that in the six months to June 30, 2021, local insurers posted solid results.
For example, total gross premium written (GPW) for short-term insurers, according to official data obtained from IPEC, amounted to ZWL$9.95bn, reflecting a 262.84% nominal increase from ZWL$2.74bn reported in the prior comparative period.
The total business written by short-term reinsurers increased from ZWL$1.25bn for the period under review to ZWL$5.22bn for the period under review, which is a nominal increase of 317.60%.
Total assets for short-term insurers increased by 21.94% in nominal terms from ZWL$11.44bn reported as at March 31 2021 to ZWL$13.95bn as at June 30 2021.
Investments in prescribed assets by short-term insurers increased by 35.94% from ZWL$354.72m as at March 31 2021 to ZWL$482.22 m as at June 30 2021.
GPW by life assurance companies in the six months to June 30, 2021 amounted to ZWL$7.4bn ,representing a nominal increase of 524% from ZWL$1.18bn reported in the comparative period in 2020.
