Dollarisation Assures Insurance Sector

WHILE the dollarisation of the economy is a challenge to the country’s financial sector, it has breathed life into the insurance industry whose clients’ policies had become valueless in real terms.

Insurance Council of Zimbabwe vice president and Fidelity Life Assurance managing director, Simon Chapereka, told businessdigest this week that permission to trade in foreign currency will revitalise the troubled sector whose operations were being affected by hyperinflation.

“We believe that the liberalisation of the economy has breathed life into the sector and we will be able to offer value for our products,” Chapereka said.

Insurance companies are bleeding from hyperinflation and none-trade of the stock market.

At least 40% of insurance companies’ investment portfolio is held in equities, 50% in properties and the balance in money markets and government bonds.

Investing in government bonds was equivalent to financial suicide because of the rate at which the dollar was losing value against major trading currencies.

The non-trade of the stock market for nearly three months had also affected the movement of insurance companies’ investments, while the money market was offering returns below the inflation rate.
The stock market however resumed trade Thursday.

“The economic meltdown had rendered the value of our client’s insurance policies virtually worthless. This resulted in the downsizing of the sector coupled with severe loss of jobs in order to stay afloat,” he said.

Chapereka said Fidelity Life, like other insurance companies, had to diversify operations to remain viable. This included investment in property and spreading operations into regional countries such as Zambia, Malawi and Angola.  

“In adjusting to the environment, we had to massively downsize operations. We reduced our Fidelity Life branches from 16 to just one, and of the 300 employees we had we are left with just 51,” he said.

Chapereka said that although they were looking forward to resume operations with the reopening of branches, it would be a gradual process.

“Efforts are underway to restore the value of our clients’ policies in the foreign currency unit to instil confidence in the market and encourage injection of new business,” Chapereka said.

He said payment of salaries in foreign currency would play a vital role in the revival of the insurance sector.

BY KUDZAI KUWAZA