HomeBusiness Digest$12b fund for Insurance Commission

$12b fund for Insurance Commission

Staff Writer

THE government has budgeted a staggering $12 billion for the formation and strengthening of an envisaged Insurance and Pension Commission, as it seeks to improve the Zimbabwean regulatory enviro

nment and make the $550 billion industry more competitive.

Armed with the Insurance Act, the office of the Commissioner of Insurance has tabled for fiscal consideration a $12 billion demand to bolster the department and the industry’s operations.

Lovemore Mafurirano, the office’s head, said this when he launched Zimbabwe’s newest insurance company, Cell Insurance, majority owned by the Zimbabwe Electricity Supply Authority (Zesa) group.

Mafurirano said insurance players, totaling an odd-100, would contribute a percentage of their earnings towards the creation of this fund and as such they would have a representative voice on the commission board.

He urged insurance-member companies to make provisions for the fund in their 2005 budgets, stressing that government would ensure it is self-financing.

According to statistics gleaned from his office, seven life assurers, among them Old Mutual Life, 25 non-life, five re-insurers, 52 agents and 31 multiple agents are currently operating in Zimbabwe a fact slammed by Aon Zimbabwe boss and independent presenter David Birch.

In scathing remarks, Birch said Zimbabwe’s insurance industry was over traded.

On the insurance regulating council, Mafurirano said they had hoped for the insurance board to fall under an all-encompassing Financial Services Board – modelled along regional and international lines – but they had been scuttled by the new Reserve Bank team which had wrestled the traditional bank registry function from the main Finance ministry.

It meant, therefore, that they had to go it alone and the insurance chief said should they manage to get the right calibre of commissioners, the insurance authority could be in place by early next year.

Herbert Murerwa currently heads Zimbabwe’s Finance ministry.

Acknowledging the adverse impact of the prevailing macroeconomic problems on the insurance industry, Mafurirano bemoaned the lack of insurance underwriting capacity, especially in re-insurance.

“Inflation at the beginning of this year was estimated at 600%, which made it virtually impossible for organisations to maintain adequate sums insured,” Mafurirano noted.

“This meant that in the event of a claim, organisations would be deemed self-insured for a large proportion of the claim that in most cases would be unbudgeted for,” he added, saying risk carriers themselves were struggling to raise sufficient treaty capacity.

He said the incapacitation had also been necessitated by turbulent international political on-goings, notably the September 11 bombings in America, exacerbated by Zimbabwe’s own poor international credit rating and record.

Mafurirano said the local insurance sector has been badly hit by brain drain.

Apart from operational challenges, the insurance sector faces a tough time in meeting government’s steep statutory reserve funds, which are also applicable to the banking sector.

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