NOW that he has removed the dirt from under the carpets of financial institutions, Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono says he is moving in on the insurance and pension fu
nd sector where the situation could be worse.
“We are compiling a list of all defaulters and those caught on the wrong side of the law will have only themselves to blame,” Gono said last week, departing from his prepared presentation.
“There is a lot going on in the insurance and pension fund industry and we will get to the bottom of it. Hollick, (Graham) I hope your members are listening.”
Graham Hollick is Old Mutual Zimbabwe boss and caught the governor’s attention when he asked a question at the monetary policy statement review presentation.
Insurance sector firms listed on the Zimbabwe Stock Exchange (ZSE) include Fidelity Life, First Mutual, NicozDiamond, Old Mutual, Sare and Zimnat.
First Mutual is currently under suspension from the bourse because it was exposed to the collapsed ENG Asset Management, shut down by Gono when he began his clean-up exercise of the financial services sector in December.
The matter between the ZSE and First Mutual has now taken a legal twist and is headed for the courts.
There are several insurance and pension fund firms not listed on the ZSE and Gono said these would also be investigated because some of them were reaping but not ploughing back into the public sector.
Major companies in the sector include the National Social Security Authority Pension Fund, Mining Industry Pension Fund, PTC Pension Fund, Zesa Staff Pension Fund, NRZ Contributory Pension Fund, Local Authorities Pension Fund, Zimpapers Staff Pension Fund and Intermarket Holdings.
“As monetary authorities we also take a keen interest in the stability of the insurance and pension fund industry, as it has an important bearing on the smooth functioning of the banking system,” Gono said in his prepared speech.
“We are, however, greatly concerned that the majority of players in this industry are not complying with prescribed asset holding thresholds, citing unavailability of long-dated government paper in the market.”
He said investigations by the central bank on the industry so far had been shocking as the majority of institutions were flouting laid down procedures.
According to the insurance and pension fund industry’s compliance status as at December 31, companies in the life assurance, life reinsurance, non-life reinsurance, funeral reinsurance, and self-administered pension funds were not complying with RBZ regulations. Only non-life assurance firms were complying.
“We are moving in on the sector,” Gono said. “You cannot eat your cake and have it.”
According to the regulations, life assurance firms are required to have a prescribed assets holding of 45%, non-life assurance 30%, life reinsurance 45%, non-life reinsurance 30%, funeral reinsurance 45%, and self-administered pension funds 45%. However, the central bank governor pointed out that the situation on the ground was a cause for concern.
Life assurance firms stood at 9%, non-life assurance 31%, life reinsurance 5%, non-life reinsurance 14%, funeral reinsurance 21%, and self-administered pension funds 19%.
At 31% however the actual figure for non-life assurance was above the 30% requirement, giving it a positive variance of 1% and, therefore, fully complying with RBZ regulations.
“As part of efforts to engender long-term stability of the financial sector, we strongly recommend to the authorities, auditors, boards and trustees to take necessary steps to ensure compliance with statutory requirements by the insurance and pension fund industry,” Gono said.