Interview: Actuaries boss lays out Zim legal game plan

Actuarial Society of Zimbabwe (ASZ) president Tafadzwa Chiduza

FIVE years ago, Zimbabwe’s actuarial profession embarked on an important journey. Leaders of the Actuarial Society of Zimbabwe (ASZ) began looking into the enactment of legal statutes to guide operations of the sector. The plan to come up with a law kicked off after a commission of inquiry set up by the late former president Robert Mugabe said it had discovered weaknesses within the profession. This week, our senior business reporter Melody Chikono (MC) caught up with ASZ president Tafadzwa Chiduza (TC), to understand how the law-making process is progressing. Chiduza also gave insights into hurdles that lay ahead as ASZ implements International Financial Report Standard 17 (IFRS 17), which came into effect this January.  Here is how their discussion turned out…

MC: What is the role of actuaries in economies?

TC: An actuarial function looks at statistical estimations and quantification of technical liabilities on the balance sheet of an institution. The role also expands to cover product innovation and management, as well as general risk management oversight. Actuaries also make good business leaders as evidenced by a number of them who are occupying corporate leadership roles within institutions.

In Zimbabwe, actuaries are involved in the management of pension and retirement schemes, insurance companies, medical aid schemes, banks and other similar sectors. The role of an actuary is mostly defined in regulation. Beyond regulated roles, actuaries also work as typical business people delivering value and helping ensure the stability of different institutions.

MC: As ASZ, what have been your achievements in Zimbabwe?

TC: We have worked to enhance the actuarial profession in Zimbabwe. This is one of the core mandates for our existence as a society. We have developed actuarial guidelines for actuaries to unpack grey areas of their work. We religiously hold an annual actuarial convention where we invite globally acclaimed presenters to cover different professional and technical matters. We work closely with universities through seconding industry players to assist in lecturing and mentoring of prospective actuaries studying in these institutions. We work closely with regulators and policy makers. This includes the Insurance and Pensions Commission of Zimbabwe (Ipec), which relies on actuaries as technical partners. Currently, we are giving technical support for the statistical research and pricing of an area yield index insurance product. This is a national research being spearheaded by Ipec, in conjunction with Access to Insurance Initiatives (A2ii). 

MC: We understand that you are currently working on a Bill. Tell us more about this process.

TC: The Actuaries Bill seeks to take our profession to the next level in terms of boosting confidence and reliance on our work by stakeholders. We draw a leaf from what lawyers, accountants, medical practitioners and engineers have done already. We believe that our work is vital, hence we need to strengthen our pillar the supervision of our membership.

MC: Has this also happened in other markets?

TC: Actuaries in other jurisdictions have come up with different processes of enhancing their practices and aligning with their legislative frameworks. For us, we believe if adopted, this could go a long way in aligning with other existing legislative frameworks in the country. We were cited in the Justice Smith Commission of Enquiry into the Conversion of Insurance and Pensions Values from Zimbabwe to US dollars as a profession with shortcomings. There were recommendations for us to come up with ways of enhancing the profession. We believe adopting the Actuaries Bill would be a bedrock to propel the profession forward in a closely guided manner.

MC: So, what setbacks are you expecting as you go through this process?

TC: Implementing a Bill is not an easy, fly by night exercise. The research that goes into it has to be thorough and encompassing. This includes considering feedback from all stakeholders as part of the consultative process.

The Bill has been in the making for over five years now. I took office as ASZ president midstream. The real setback is that energy levels deplete. Some volunteers assisting the process migrate to different countries, and new implementers come on board. Continuity of the process suffers. However, it is our hope that we continue with the drive and one day have an outcome that is positive and welcome by our membership and wider stakeholders who are the consumers of our services.

MC: Your sector will soon embrace new international financial reporting standards known as IFRS 17. There are already indications that implementation of the standard could be a challenge. Please take us through the technicalities around this transformation?

TC: IFRS17 came into effect from the 1st of January 2023. It will succeed IFRS4, which was an interim standard. Now, IFRS17 focuses on measurement and recognition of insurance contracts within a company’s financial statements. Due to the sheer nature of IFRS17, which is transformative, implementation on the ground is indeed fraught with different challenges.

The difficulties range from skills redundancy, lack of appropriate information technology (IT) software, requisite data inputs, budgetary constraints and delayed implementation by affected entities. Some of them are now behind in terms of implementation, and they had to scrounge around to meet the deadline.

To smoothen the implementation process, we believe a good starting point will be having buy-in from the board of directors and senior management (of companies). Training of boards will be key to ensuring that they fully understand the standard. They must be equipped to proffer requisite support (to their institutions). We also recommend that insurers must consider investing in IT software that have been fully developed for IFRS17. This reduces the implementation burden, and the timelines. Lastly, we recommend the involvement of external auditors early on. External auditors could help in the alignment of expectations.

  1. What are the costs of implementation of IFRS17?

TC: The cost varies depending on factors like the size of an entity, whether they write long-term or short-term (annual) products and the complexity of current systems. However, what we note in general is that IFRS17 is not a project that could be fully implemented in a few weeks due to its transformative nature, where it changes not only the financial statements’ reporting structure, but also the business practice. It is not unusual to see a project plan that could potentially span beyond six months, even for small entities. This could give a guide on the approximate implementation cost. There will also be a secondary cost in enhancing in-house skills, aligning systems and other processes, which is always a hidden cost in most cases and hence should not be underestimated.

MC: What is the future of the actuarial profession in Zimbabwe. Do you see growth?

TC: We are quite optimistic about the future. We expect the profession to grow significantly. This is informed by the number of areas of financial services work where actuarial input is needed. This demand in skills will create a pulling effect to attract some of the best talent to the profession. Already our universities are churning out Actuarial Science graduates. They produce more than 200 every year. This is unlike in the past when we could only have around 25 graduates per year from one university. As ASZ, we continue to play our key role of inspiring confidence, assisting in the development of quality professionals and helping in the growth of our country.

MC: What common risks do actuaries deal with in Zimbabwean markets?

TC: The common risks we notice across the board include incessant pressure from macro-economic challenges around inflation, high interest rates and currency instability.

This often subdues efforts by business leaders to ensure viability and survival of institutions. A more specific risk includes increased competition leading to price (premium) undercutting by insurers thereby selling unprofitable and unviable products. These risks diminish shareholder value in the medium to long term. In some instances, they threaten the capital and solvency position of financial institutions.

MC: What is your outlook for 2023?

TC: As ASZ, we will be continuing building the growth of our society. To date, we have already managed to carry out a rebranding exercise. We will be having our annual general meeting on the 31st of March 2023. This will be an election year where a new council and president would be elected to serve for the next three years.

Major events coming up for ASZ include our annual Actuarial Convention to be held on the 8th and 9th of June 2023.

We will also be hosting the inaugural Actuarial, Finance, Risk and Insurance Congress (AFRIC) in Victoria Falls in July. AFRIC is a global event and we are excited to be hosting its first congress.

There will be other numerous exciting events, which are documented on our website. Beyond 2023, we really look forward to an exciting and engaging ASZ that delivers value and serves all our stakeholders better.

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