HARARE – Finance minister Patrick Chinamasa (pictured) has declared war on local funeral assurers failing to meet minimum capital requirements and prescribed asset requirements as the country’s deteriorating economy continues to affect the insurance sector.
The minister, who last year reviewed minimum capital thresholds for the insurance sector, said funeral assurers remained defiant to calls to meet prescribed requirements, setting the Insurance and Pensions Commission (Ipec) on the insurers.
“The insurance and pension industry has also remained subdued during 2016 owing to viability and liquidity challenges obtaining in the economy.
“The 2016 National Budget Statement highlighted low levels of compliance to prescribed asset requirements by the insurance and pensions industry, which has since improved.
“However, funeral assurers remain defiant despite repeated calls and, hence, the Ipec will be enforcing compliance measures, including penalties from 2017,” Chinamasa said recently.
This comes as government last year proposed to introduce a raft of measures that included the review of qualifying assets for calculation of prescribed assets as well as deterrent penalties which include cancellation of operating licences in the sector.
The treasury chief ordered Ipec to, in the first quarter of 2016, review the qualifying assets for minimum capital requirements to improve asset quality.
Presently, the draft Bills for the insurance and pension industry are being finalised, taking into account stakeholders inputs. By end of June this year, the total asset base for the funeral industry was $56,136 million, with prescribed assets continuing to be grossly under-subscribed despite directives to the contrary as well as regulatory minimum of 7,5 percent.
Ipec is on record saying it will continue to penalise the industry in order to ensure compliance.
In the first half, three funeral assurers continued to be under-capitalised well below the minimum required capital levels of $1,5 million.
Corrective efforts are on-going, with the industry reporting an average capital to liability ratio of 134 percent and liquid ratio of 123 percent showing solid capacity to offset claims and other obligations on demand.
The assurers posted a two percent growth in net written premiums for the half year to June 30 recording $18,7 million compared to $18,3 million of the same period last year, as top three funeral assurers wrote $16,8 million of net business while the remaining six players shared $1,8 million business.
Performance of the insurance and pension sector has largely remained depressed owing to low economic activity, legacy issues emanating from the conversion of insurance and pension policies from Zimbabwe dollar to US dollar values and liquidity challenges, among others.
