RECENTLY the Insurance and Pensions Commission (Ipec) held its fourth Annual General Meeting (AGM) in Harare. Ipec commissioner Grace Muradzikwa (GM) shared insights into the milestones the regulator had achieved, challenges and proposed solutions. Our senior business reporter Melody Chikono (MC) caught up with her to discuss these issues in detail. Below are excerpts of the interview:
MC: Commissioner, can you shed more light on the cyber risk and climate financing frameworks that Ipec is working on?
GM: With increased digitisation, cyber risk has also been enhanced. When you talk about cyber risk it is about the protection of data; to what extent are you protecting the policyholder data. That cyber security framework is going to address that. It will provide guidelines to industry on how to treat policyholder information, especially protecting it against cyber risks.
The other is climate disaster risk financing. We are seeing an increase in natural hazards. In Zimbabwe, we never used to experience cyclones and so on but you will admit that of late they have also been on the increase. When cyclones happen, the first thing that one thinks about is how do we get back on track so you have to start thinking about disaster risks financing, to say how do we finance disasters?
It has to be a conversation between the public and the private sectors because the private sector on its own cannot look at disaster risk financing. It is a framework that we are looking at together with the industry to address disaster risk finance in light of climate risk changes that we are witnessing.
MC: Any timelines for the frameworks?
GM: We are looking at the end of Q3 for both frameworks. It is the data integrity, which is very important. This is because of the challenges that we are seeing. We are prescribing minimum data standards, for instance how many years an insurance company should keep data for policyholders?
We are seeing that they are writing long-term policies but they will tell you that they no longer have the information. A person lives 40 years, 50 years and in other markets you are required to keep data for 100 years. Here we did not have those standards. Certainly by the end of Q3 and those are our focus areas.
Fact file: Grace Muradzikwa
- She is an insurance executive with over 37 years in the sector.
- Muradzikwa was a member of the co-founding team that established the Zimbabwe Reinsurance Corporation in 1984.
- Became the first black woman head a publicly-traded company (NicozDiamond), a position she held until her departure in February 2019. She was the Insurance and Pensions Commission (Ipec) commissioner, in June 2019.
- Is a fellow of the Institute of South Africa and of the Toronto Centre for Global leadership in Financial Supervision.
- She has won several local and continental awards.
- Muradzikwa has served on various boards of local, regional and international institutions, among them, the Zimbabwe Revenue Authority (Zimra), the Federation for Afro Asian Insurers and Reinsurers and the Association for Insurers and Reinsurers in Developing Countries.
- Women in Insurance Zimbabwe patron and former president of Professional Women in Business (PROWEB) in Zimbabwe.
- Holds a Bachelors’ Degree in Administration, Masters’ Degree in Business Administration, and an Honorary PhD in Leadership.
MC: On data integrity you raised concern on the distribution of the Kuvimba mining dividend. What are the issues?
GM: For me it is inexcusable to write long term business without data. It simply means you never intended to pay. As we are working on the minimum data standards, we are going to be expecting a push back. This was the biggest challenge we faced on the distribution of the Kuvimba dividend. There has previously been a push from companies to give them money for distribution.
But how do they distribute when they do not have data? We would rather know now that we do not have data. If we had not distributed the money, we had no way of knowing whether people were given money or not.
Now we know that we do not have the data. We have realised that people that were getting a thousand are not there, we only managed to locate 50%.
The responses were very different. But the question is if there are people you are paying pensions on a month-on-month basis, why are we getting such kind of responses? Some are dead, some are not reachable and so on.
Pensioners are suffering and there is no way one would ignore to come and get US$100. Now we are looking at working on another tranche that is coming. We would not want to be sitting on that money.
The data issue is a big issue. Even when we look at the pre-2009 issues, it could be another setback because they do not have the information on those people. But we will issue guidelines on how the money is going to be distributed. We are seized with this issue to say, how can one write long-term business and not keep data?
MC: You also raised concerns on delays on bills that you have tabled in parliament. What has been the impact of those delays on the operations of the industry?
GM: We get our powers from bills. So when the bills are not going through parliament, it limits our powers to carry out our mandate. All these delays have been affecting the commission. If you go back to the Justice Smith report, you remember the commission highlighted that Ipec did not have regulatory powers. That is when this whole process of reviewing the bills started.
You can imagine since 2016 up to now, the bills are going through but nothing has happened. The market is complaining of circulars and guidelines, 44 circulars in a year and in 2021, we even issued a similar number. But what can we do? We cannot just sit and wait for bills that have been going through parliament since 2016. So we have been using circulars and guidelines to regulate the market and basically if you look at one of the issues, it is about contribution arrears where you see that employers are taking money from the people but are not remitting to the pension funds.
So one of the powers that we are seeking to have is the power to garnish the employers, just like Zimra (the Zimbabwe Revenue Authority). So if we hear that an employer has been taking money but not remitting, we will be able to garnish them. Right now we are sitting on over ZW$7 billion (US$17, 37million) contribution arrears and the time value of money is of essence here.
By the time it is paid it will be worthless; the same reason why we are asking why on average a pensioner is getting ZW$14 000 (US$34) at the moment.
The whole legislative process is long.
We hope that by the end of this year the bills will have come through parliament. We had to work with circulars and guidelines to address the mischief in the industry. Principles for these bills were approved in 2012 at the end of the government of national unity (GNU); they were considered by the cabinet.
They took almost five years at the drafting stage at the Attorney General’s Office because of capacity constraints and so forth.
The Pension Providence Bill went to parliament for the first reading in 2019 only to be passed in 2022. The Ipec and the Insurance Bill went to parliament in February and until now they are still at the committee stage. Ipec is putting stopgap measures that are fragmented. So the ideal situation is to have legislation that closes all gaps through regulations.
MC: You have indicated that you received an application for offshore investments. What are the numbers looking like?
GM: At the moment we are sitting on two applications. We approved an offshore investment guideline so pension funds can now invest offshore to preserve value. The process is that they must come to Ipec for a letter of support and we look at the investment they are going into then they go to the Reserve Bank of Zimbabwe (RBZ). We have now constituted a committee between Ipec and RBZ to consider these applications. Investing offshore does not mean it is a good investment. You can lose money so we want to take it through our test to ensure that the investments are credible and are good investments.
At the moment we have one for US$14 million and another for US$5 million. If I am not wrong we have already approved one from both ends and the other is still pending. There is a huge appetite but I think the challenge is to identify those investments.
There are some who are just fly-by-night and are only coming to Zimbabwe because of the availability of US dollars. So you need to really make sure they are authentic because these are pensioners’ monies. The government has been encouraging these people to invest.