INSURANCE and Pension Commission (Ipec) has blamed the introduction of the Statutory Instrument 142 for the failure by some insurance companies to settle outstanding claims and transfer funds to ultimate risks carriers amounting to US$11,8 million.
By Cloudine Matola
The Reserve Bank of Zimbabwe (RBZ) on June 24 this year introduced the Zimbabwean dollar as the sole legal tender in the country for all transactions, bringing to end the multi-currency regime which was introduced in 2009 after years of hyperinflation.
It emerged at the Institute of Insurance of Zimbabwe (IIZ) winter school in Nyanga this week that insurance brokers are currently holding on to trust funds amounting to US$1,1 million, which they are failing to transfer to the respective ultimate risk carriers.
Insurers are failing to settle outstanding claims amounting to US$4,9 million. Direct insurers are finding it hard to remit premiums amounting to US$5,8 million.
Ipec director of insurance and micro-insurance Sibongile Siwela said SI 142 has rendered the minimum capital requirement insufficient in the current economic environment owing to inflation which stands at 175,66% (year-on-year) as at June 2019.
“The implication of SI 142 on insurance industry is the failure by insurance brokers, who are currently holding onto trust funds amounting to US$1,1million, to transfer the funds to the respective ultimate risk carriers such as insurers, local reinsurers or foreign reinsurers,” Siwela said.
“Insurers or ultimate risk carriers are failing to settle outstanding claims amounting to US$4,9 million and direct insurers are also finding it hard to remit premiums amounting to US$5,8 million to ultimate risk.”
She added that consumer confidence in the insurance industry has been dented owing to legacy loss of value due to inflation and previous currency reforms.
Siwela added that SI 142 had also rendered the minimum capital requirement insufficient in the prevailing economic environment, as inflation continues to bite.
“The current minimum capital requirements, which were initially calibrated in US dollars are now in RTGS$ and have become inadequate in the current economic environment,” she said.
“The inflationary environment has also played a role in eroding the effectiveness of the RTGS-denominated minimum capital requirements.”
The insurance industry has been on a recovery path during the multi-currency regime which was introduced in 2009. However, due to currency volatility, consumer confidence in the sector is rapidly eroding.