SCORES of insurance companies risk forced closure following their failure to meet re-registration criteria set by the Commissioner of Insurance.<
Many ailing players in the industry which has been hit by high inflation and poor quality business have until the end of the month to register with the commission that falls under the Ministry of Finance.
The re-registration exercise followed the amendment to the Insurance and Pensions Act in 2004 which set up a Commission of Insurance and Pensions.
The Commissioner, Ninette Mpofu, was only appointed last year.
She immediately embarked on a re-registration exercise which should have been concluded early this year. However, some insurance companies have failed to register.
Addressing the Insurance Institute of Zimbabwe annual general meeting in Nyanga this week, Mpofu gave chilling statistics on the registration exercise and warned those not registered that they will soon be deemed to be operating illegally.
Mpofu said there was a possibility of unregistered companies being “put under curatorship or some form of management”.
Responding to industry concerns on what would happen to the companies and individuals insured by unregistered companies, Mpofu said: “Your clients will be asking questions why you
did not comply. You are going to lose business.”
Mpofu said 67% of life assurers were registered so far, 60% short-term, 50% reinsurers, 17% funeral assurers, 23% brokers and 14% multiple agencies.
She said new players in the sector would be required to raise capital which conformed to regional standards.
Mpofu said the current figures were too low. She cited Mozambique where capital requirements for new entrants were between US$1,5 million and
US$ 2,5 million.
“You should expect figures in this region,” said Mpofu.
The commissioner is this month expected to publish a list showing registered and unregistered insurance firms.
It is the impending publication of the list which is causing panic in the sector as unregistered companies which are currently operating are afraid of losing business.
As part of the registration exercise, insurance companies are expected to provide the commissioner with their shareholding structure, management profile, business profile and capitalisation.
The commission also requires companies’ audited accounts. Financial services sector sources said the requirements were less stringent compared to conditions set for registering a new banking institution.
There is real worry in the insurance sector that smaller companies will fail to meet the required capitalisation thresholds. Insurance firms have been struggling to pay subscriptions to the Insurance Institute of Zimbabwe resulting in them being excised from the membership list.
Company bosses who have not registered were in Nyanga this week privately lobbying the commissioner for an extension to put their act together before the chop.
She encouraged smaller players in the industry to merge to enable them to meet registration criteria and to raise the required capital.
Meanwhile, insurance companies raised concern over government’s thrust forcing them to subscribe to a government paper with a tenor of 300%. Industry feels that the rate is too low in the hyperinflationary environment where independent analysts have put the figure at above 30 000%.
Industry players have said under such circumstances, the prescribed assets ratio undermines the regulatory objective to maintain industry viability.
They urged Mpofu to take up the issue with government.