Struggling pensioners who have waited years for their benefits and policyholders left in the lurch by collapsing insurers may find some relief, as Parliament moves to amend the Insurance and Pensions Commission Act to strengthen oversight, establish a protection fund and tighten governance in the sector.
The Insurance and Pensions Commission Amendment Bill (H.B. 7A, 2024), currently before Parliament, introduces sweeping changes to the regulatory framework governing Zimbabwe’s insurance and pensions industry, a sector long plagued by complaints of delayed payouts, mismanaged funds and opaque operations.
For thousands of Zimbabwean pensioners, the promise of a comfortable retirement has often turned into a nightmare.
Many have gone years without receiving their benefits, while others have watched their hard-earned savings eroded by inflation and poor investment decisions.
Policyholders, too, have faced uncertainty when insurers become insolvent, with little recourse to recover their money.
The Bill seeks to address these challenges through a combination of enhanced regulatory powers, stricter governance requirements, and the establishment of a safety net for policyholders and pension fund members.
One of the most significant provisions in the Bill is the creation of the Policyholder and Pensions and Provident Fund Members Protection Fund under the new Part IIB.
According to Clause 12, which inserts new sections 23E to 23T, the Fund will be established as a body corporate “capable of suing and being sued in its own name” and will be administered by a dedicated board.
The object of the Fund, as stated in new section 23F(5), is twofold, “to compensate policyholders and pension, provident or retirement annuity fund members in accordance with this Act for losses directly incurred by them in the event of a contributor becoming insolvent” and to “payout unclaimed benefits to the rightful owners whenever a claim is made.”
This means that when an insurer or pension fund collapses, policyholders and pension fund members will have a mechanism to claim compensation for their losses, a safeguard that has been conspicuously absent in the current framework.
The Bill also addresses the vexing issue of unclaimed benefits, which have accumulated over years in the coffers of insurers and pension funds.
New section 23F(3)(g) includes among the Fund’s resources “unclaimed benefits from insurers and pensions, provident or retirement annuity funds that have exceeded five years,” as well as “unclaimed benefits after dissolution of pensions, provident or retirement annuity fund or winding up of an insurer.”
Section 23F(4) also provides that the Board “should ensure that all unclaimed benefits specified in paragraph (g) together with any interests obtained from investments of such unclaimed benefits are held in security for the claims of its rightful owners and only to be used for the purpose of compensating the rightful owners.”
However, the clause contains a controversial provision allowing that “should the monies remain unclaimed for a period of over 30 years,” the Commission, that is IPEC, may, with the Minister’s approval, “divest such funds to other objectives of the Fund.”
The Bill also seeks to significantly strengthen governance requirements for the Insurance and Pensions Commission itself.
Clause 5 amends section 5 of the principal Act, expanding the Board from five appointed members to “not fewer than seven or more than nine other directors appointed by the Minister.”
New subsection (3) requires that appointees “shall be appointed for their knowledge of and experience in pension and insurance matters, actuarial, legal, finance, human resources management, information technology, or related fields of expertise.”
Clause 6 introduces stricter disqualification criteria, barring from appointment anyone who “is under the employment of any other such body or organisation under the supervision and regulation of the Commission or any organisation associated with an entity under the supervision and regulation of the Commission or has conflict of interest to perform his or her duties independently.”
The definition of “conflict of interest” in new Section 6(4) includes board membership or employment in a regulated entity, direct or indirect shareholding exceeding five percent in a regulated entity, that is “closely related” to any person employed in a regulated entity, or having a controlling stake.
The Bill expands the Commission’s functions with Clause 4 amending Section 4 to include new responsibilities such as approving “for the purposes of continuing or commencing operations in the insurance and pensions sector, actuaries, asset managers, credit rating agencies and other service providers,” and conducting “investigations into any particular registered person or class of registered persons” where necessary.
Clause 11 strengthens the Commission’s information-gathering powers by making non-submission of requested information a criminal offence, with penalties of “a fine not exceeding level seven or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment.”
New section 32B, inserted by Clause 14, introduces strict controls on disposal of assets by regulated entities.
No insurer, insurance broker, medical aid society, or pension fund “shall dispose of any asset that is recorded in the Commission’s register without giving 14 days’ prior written notice to the Commission.”
The notice must be accompanied by “an independent valuation report and reasons for the disposal.”
Where the Commission believes the proposed disposal “would not be in the best interest of the policyholders and pensions or provident fund members,” it may direct that the disposal be stayed.
Penalties for contravention are severe: for insurers, brokers, or medical aid societies, “a fine not exceeding the value of the asset disposed of or imprisonment for a period not exceeding five years or to both such fine and such imprisonment.”
For pension and provident funds, Board members are made “jointly and severally” liable.
The Bill also introduces new provisions for cooperation with foreign regulators.
New Part IIA, inserted by Clause 12, allows the Commission to foster relationships with “any supervisory authorities, including foreign law enforcement authorities or foreign insurance and pensions supervisory authorities” for purposes including negotiating cooperation agreements, exchanging information, and carrying out investigations.
Section 23C permits the Commission to share privileged information with other authorities, provided the requesting party “undertakes to treat the information with confidentiality it deserves.”
A new Section 32C provides that “any person who is aggrieved by the decision of the Commission in terms of this Act may lodge an appeal with the Minister within 14 days from the date the decision is made.”
The amendments come against a backdrop of persistent challenges in Zimbabwe’s insurance and pensions sector, as pensioners have for years complained of meagre payouts that bear no relation to contributions they made during their working lives, with inflation eroding the value of their savings.
Delays in processing claims, lack of transparency in investment decisions and in some cases outright mismanagement of funds have left many retirees in poverty.
The collapse of several insurers and pension funds over the years has further eroded public confidence in the sector.
The Bill’s explanatory memorandum states that its purpose is to make sure “the principles of Public Administration and Leadership set out in the Constitution of Zimbabwe and the Public Entities and Corporate Governance Act are fully incorporated” into insurance and pensions legislation.
The Bill now awaits further debate in Parliament before it is passed into law.