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Insurance penetration rate remains subdued

ZIMBABWE’S insurance penetration rate remains subdued due to exorbitant capital requirements that are threatening the viability of the sector, an insurance expert has said.

By Fidelity Mhlanga

The rate has decreased from 6% to 1,7% over the last decade for, among other reasons, high capital requirements, which the Insurance and Pensions Commission of Zimbabwe pegged at US$1,5 million for life insurance and US$5 million for reinsurers, Insurance Institute of South Africa president Delphine Maidou (pictured) said.

“What is surprising in Zimbabwe is that the capital requirements are higher compared to South Africa. Why are premiums leaving? Capital requirements are an issue. Capital requirements are forcing companies to exit as they cannot sustain the business,” Maidou said at the Insurance Institute of Zimbabwe conference in Victoria Falls.

South Africa’s minimum capital for life and non-life insurance is US$850 000. According to Maidou, South Africa’s insurance penetration rate is 14%.

The growth of the country’s insurance sector was also hampered by low income levels, cash constraints, company closures and increased competition on undercutting premiums, she added.

Nigeria, with a capital requirement of US$10 million for life insurers, US$15 million for non-life insurers and US$25 million for composite insurers, is also experiencing low insurance penetration levels, Maidou said.

She bemoaned how Zimbabwe was losing critical skilled insurance personnel to South Africa at a time when the country needs experts to rebuild its economy.

“When we look at the Institute of South Africa during graduation, about a fourth are from Zimbabwe. South Africa needs skills, but I think Zimbabwe needs them more,” Maidou said. “The issue is Zimbabwe must be thinking about bringing them back to grow the economy.”

Going forward in Africa, she said the market will opt not to insure assets, with consumers resisting the inevitable increase in insurance premiums, given that some economies are already contracting and are hamstrung by high inflation.

“There is potential disinvestment by international insurance and reinsurance companies and underwriting performance will be under excessive pressure,” Maidou said.

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