Insurance capital requirements hiked 233pc

HARARE - Zimbabwe has increased the minimum capital requirements for insurance firms by 233 percent to $5 million from the current $1,5 million, businessdaily has established.

Finance minister Patrick Chinamasa said the upward review of minimum capital requirements for the insurance sector was aimed at improving underwriting capacity and contain insurance business outside the country.

“The Insurance and Pension Commission (Ipec) will soon be announcing the modalities for the upward review,” he said.

This comes as the country’s insurance sector — on a recovery path after having gone through difficult challenges in the last few years — is currently weighed down by operational challenges resulting from political and business uncertainty.

Information from Ipec reveals that at least eight insurance companies — out of 33 short-term and life insurance firms — are yet to meet the minimum capital requirements of $1,5 million which came into effect in June 2014.

Despite these challenges, Chinamasa also plans to increase levies on the struggling insurance firms as a way of capacitating Ipec, which currently lacks capacity to adequately supervise the industry owing to limited technical, human and financial resources.

“In order to improve the regulatory capacity of Ipec, especially on-site supervision, I propose an upward review of levies being charged to industry players. The new levies will be gazetted by the fourth quarter of 2015,” he added.

Meanwhile, an international research group Business Monitor International (BMI) said Zimbabwe’s insurance industry is set to register double digits growth this year — in both the life and non-life sectors — despite deteriorating economic conditions in the country.

In its latest economic report on Zimbabwe, BMI said the life sector will continue to dominate the insurance market and outpace non-life growth, given the attractiveness of the former as a long-term savings option.

“However, one majorinsurance company — Old Mutual — dominates the market, which will hurt competitiveness,” the research firm said.

Despite the operational challenges affecting the country’s insurance firms, BMI remains cautiously optimistic for the prospects of Zimbabwe’s insurance industry.

“Retention ratios are high, claims ratios are low and strong growth is expected to continue. There are, however, many persistent issues and threats. As a young insurance market, the regulatory framework

remains untested, particularly in the fast-growing life sector,” said the international research firm.

A recent report by Ipec revealed that non-life insurers reported total gross premium written (GPW) amounting to $214,91 million for the year ended  December 31, 2014 compared to $207,69 million in the corresponding period in 2013.

Gross premium written amounting to $90,94 million was generated through insurance brokers.

On the other hand, the business written by reinsurers increased from $99,52 million for the year ended  December 31, 2013 to $101,20 million for the year under review.

The report by Ipec noted that in the period under review, reinsurance brokers generated business worth $63,61 million on behalf of reinsurers.

The insurance commission noted that asset base for the insurance industry increased marginally from $326,72 million as at September 30, 2014 to $329,9 million by end of December last year.

 

Comments (4)

Is this such increment real considering the current economic conditions in Zimbabwe? The increment is too much. Is the government encouraging the insurance companies to merge?

kunokwedu - 20 August 2015

The increment is too much considering the current economic conditions. Is the government trying to encourage the mergers and takeovers among insurance companies? It should be proportionate to economic growth. The first and foremost issue is to promote economic growth, touching a quite number of issues.

kunokwedu - 20 August 2015

i dont think this report gives a fair picture of the economy ..the fact that funeral assurance is the most grossing means the country business index shows more people are pessimistic hence their fear of not getting proper berial,2 it shows there is vertually no new productive sources as indicated by the marginal increase in premiums by reinsures,further to that you can also see that the insurance premiums are driven by short term car insurance ,mostly dominated by second hand cars ,which therefore means our risk provision is toxic to the nations balance sheet ,as it locks out productive funds for new innovation to safeguard old and depleted assets.i think this nation is just full of crap,a lost cause to a man with a vision,a paradise to looters and those ailing old corrupt politicians .

are we really educated - 20 August 2015

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