Zimbabwe’s insurance sector has largely dollarised with 65 to 70 percent of business in the sector conducted in foreign currency, the Insurance and Pensions Commission (IPEC) has said.
The IPEC Commissioner, Dr. Grace Muradzikwa, said this is due to the value preservation of the foreign currency compared to the local currency which has to be constantly reviewed for inflation.
“As at December 2022, this sector wrote business worth ZWL$173 billion,” she said. “There was nominal growth of 353 percent between December 2021 to December 2022. In forex, premiums worth US$146 million were written, registering a growth of 59 percent between December 2021 and December 2022.
“This sector has largely dollarised, probably between 65 and 70 percent of business underwritten by the insurance sector is now in forex speaking to the value preservation of the currency.”
Dr Muradzikwa said this was because of the hyperinflation environment, the sector would frequently need to review asset values in order to keep up with inflation if business was done in local currency.
“We can actually see that holders are now preferring to keep assets in US dollars as it is not necessary for them to be reviewing their values frequently,” said the IPEC commissioner.
Nevertheless, looking at the combined asset base for the insurance sector, the IPEC commissioner said this grew from ZWL$113 billion from December 31, 2021 to ZWL$l$392 billion as at December 31, 2022.
In terms of the pension sector in Zimbabwe, there were 981 pension funds as of December 31, 2022, Dr Muradzikwa said.
“Two years ago there were 1 100 pensions. But the inactive funds are dissolved so members can get their savings. We noticed a lot of inactive funds, which are hit by costs resulting in loss of value for members so we were engaging the sector that all inactive funds, or those that are struggling need to be dissolved or join umbrella funds, then have the benefit sharing costs of administration,” she said.
Out of 981, only 504 are active funds.
“There are 932 236 members including beneficiaries in Zimbabwe. Then we have 35 202 pensioners and 25 565 beneficiaries,” said the IPEC commissioner.
As for the pension sector highlights as at December 2022, Dr Muradzikwa said the country had ZWL$1.1 trillion in assets.
“ ZWL$997 billion of the asset concentration of the ZWL$1.1 trillion is in investment property and quoted equity accounting for 72 percent of the industry assets. The ZWL assets are value preserving assets, notwithstanding the loss caused by the bearish performance of the Zimbabwe Stock Exchange towards the end of last year, We hope the stock exchange will recover then see good performance,” said the IPEC commissioner.
US$193 million are in equities and prescribed assets, accounting for 65 percent of the forex assets, she added.
As for the pension income and expenses as at December 2022, the total income is ZWL$4 705.36 billion.
“ZWL$313 billion of that was fair value gains, ZWL$222 billion was interest and ZWL$81 billion was contributions,” Dr Muradzikwa said.
“Then ZWL$89.52 billion were expenses. We interrogated expenses for the pension funds, and are pleased that 76 percent of the expenses went towards the core mandate of paying members seized with other expenses of service providers.”
The IPEC commissioner noted that the insurance and pension industry was key for risk mitigation, social protection and economic development in the country.
“IPEC does not sell insurance and I want to emphasise this because very often, people, policy holders and pensioners will come to IPEC seeking compensation but their contracts are actually with our regulated entities. We do not sell insurance and we do not receive any pension contributions,” Dr Muradzikwa said.
IPEC is a statutory body established in terms of the Insurance and Pensions commission Act, Chapter 24: 21 to regulate the insurance sector and private occupational pension fund for the protection of policyholders and pension scheme members.
In the insurance and pension industry, there are a total of 2 407 registered players.
These are divided as 12 life assurance companies, eight burial assurance companies, 20 short term insurance companies, 10 microinsurance, 10 reinsurance businesses, 28 insurance brokers, eight reinsurance brokers, 32 multiple agents, and 2 279 corporate and sole agents.
“The need to regulate insurance is necessary for the protection of the interest of policyholders and pension scheme members and also the stability of the insurance and pension industry and the financial sector as a whole,” said the commissioner.
“Our regulated entities are collecting premiums and are promising to make good in the event of a loss, hence the need for regulation. Finally we also regulate so that we can have a developed a safe and sound insurance and pension industry,” she said.
IPEC has a five-year strategy plan that began in 2021 and will end in 2025.
“Our mission is to regulate, supervise and develop the insurance and pensions industry for the protection of policyholders and pension members through regulatory excellency. This has been an area of focus in terms of capacitating the commission so that we have the necessary skills and resources to be able to regulate and supervise the industry effectively,” Dr Muradzikwa said.
