THE Commissioner of Insurance, Ninetti Mpofu, says she has not been consulted on government’s proposal to compel insurance companies to invest part o
f funds under their management in indexed bonds.
Presenting the 2008 Budget last, week Finance minister, Samuel Mumbengegwi, said government plans to compel pension funds and insurance companies to inject a maximum of 10% of their prescribed asset ratio requirements in indexed bonds.
Indexed bonds are locally registered securities which are issued or guaranteed by the state. They are also known as gilts owing to low risks associated with them.
They provide a guaranteed source of funding for the state budget and other quasi-fiscal activities.
The Commissioner of Insurance is supposed to enforce this policy. Mpofu however told businessdigest this week that she was not aware of such a policy.
Mpofu said the Finance ministry had not informed her commission on the proposed policy changes in the insurance sector.
“We are still looking closely at the (budget) clause because there was no consultation with the minister when this proposal was made, so we are yet to understand this proposal,” Mpofu said.
Players in the insurance sector are worried by the proposal.
“I don’t see how this proposal will trigger the desired response. The capitalisation of most relatively small pension funds calls for them to invest on the stock market which is more liquid and prudent under prevailing conditions,” said a manager with a listed insurer.
Others have however welcomed the proposal. A general manager with an international insurance company said despite yielding returns lower than inflation, indexed bonds are a prudent replacement for the Reserve Bank of Zimbabwe’s insurance and pension bonds which offer a coupon rate of 300%.