FUNERAL assurers are yet to comply with government’s prescribed asset requirements, an Insurance and Pensions Commission (Ipec) third-quarter report for 2018 says.
By Melody Chikono
According to the Ipec report, the sector prescribed assets ratio stood at 1,86% in Q3 2018 from 2,04% in H2 2018.
The industry’s average prescribed asset ratio was significantly below the 7,5% regulatory minimum requirement as most assurers were well below 5%.
This was before the government position which saw minimum prescribed asset thresholds for the insurance and pension industry being reviewed upwards in order to improve resource mobilisation to support key national projects.
Funeral assurers’ minimum prescribed asset thresholds were revised from 7,5% to 10%, a position which they are expected to have complied with by December 31, 2019.
However, 2019 is expected to be worse than 2018 given the deteriorating economic situation, which will further erode incomes.
“All funeral assurers continue to be non-compliant with the prescribed asset ratio of 7,5%, as only US$1,5 milli
on was invested by funeral assurers,” Ipec noted.
“Corrective measures have already been initiated by the Commission in order to enforce compliance by funeral assurance players where prescribed assets are concerned. Industry assets worth $1,30 million were in cash form.”
Total assets for funeral assurers increased by 13,16% from US$71,62 million as at June 30, 2018 to US$81,04 million as at September 30, 2018, which was caused mainly by revaluations of properties and property purchases by industry players.
The industry average prescribed asset ratio was significantly below the regulatory minimum requirement of 7,5% for funeral assurers.
One of the biggest funeral assures — Moonlight — requires US$1,4 million to be compliant as it has only had US$102 000 of its assets invested in prescribed assets investments out of a total US$18,6 million worth of assets with a prescribed asset ratio of 0,55%.
On the other hand, Doves requires in excess of US$2,7 million to be compliant as its prescribed asset investment stood at US$1,1 million from an asset base of US$36,1 million, sitting at 3008% prescribed asset ratio, the same class with up-and-coming funeral assurer Vineyard.
Orchid, First Funeral, Ruvimbo and Sunset funeral assurers averaged between 0% and 0,4% in prescribed asset ratios.
Government ignored funeral assurers when they submitted a petition to revise the prescribed asset ratio to 2,5%, saying the requirements were working against the funeral business model being used.
Before the announcement of the 2019 national budget, Zimbabwe Association of Funeral Assurers president Solomon Chikanda told businessdigest that the margins were too high thus the association was proposing that the prescribed asset ratio be reduced to 2,5% of total assets.
“The nature of our liability/obligation as funeral assurers dictates that our members invest in the assets that provide funeral services to clients, which include, but not limited to buses, hearses, chapels, funeral parlours and caskets or coffins. In pursuit of asset liability matching and to enable our members to meet all policyholder reasonable expectations (PREs), investment in the above asset classes takes precedence above all other classes,” he said.