Finance and Economic Development Minister Professor Mthuli Ncube has warned insurance players to comply with the minimum prescribed assets threshold to promote accountability and transparency in the sector.
In his 2019 National Budget Statement, Professor Mthuli Ncube urged insurance and pension businesses to ensure adherence to their compliance plans to promote accountability and transparency for the good of policy holders and beneficiaries.
“The writing is on the wall for everyone to see the performance in terms of compliance by insurance players. This is very clear, they need to up their game,” Ncube said.
According minister Ncube, pension funds minimum prescribed asset threshold stands at 20 percent with compliance as at 31 March standing at 7.32 percent.
As at 30 June 2019 and 30 September 2019 compliance stood at 7.25 percent and 5.64 percent respectively.
For Life Assurance, their minimum prescribed asset threshold was 15 percent while compliance as at 31 March was 13.70 percent while compliance as at 30 June 2019 stood at 7.25 percent recording a 13.62 per cent further recording 5.74 per cent as at September 2019.
Short Term Reinsurers, Funeral Assurance and Composite Re-insurance are the worst performers who recorded 1.30, 0.12 and 1.80 percent respectively.
Accordingly, minister Ncube said government will relook at the amendments of various pieces of legislation pertaining to the financial sector with the objective of strengthening the supervision and regulation of financial sector entities, curb speculative tendencies and also align to international best practice.
“In this regard, amendments to the IPEC Act, Insurance Act, Pension and Provident Funds Act, Money Laundering and Proceeds of Crime Act, Banking Act and Deposit Protection Corporation Act are at various stages of processing,” said Ncube.
He proposed a review of minimum capital requirements with immediate effect with Short Term insurance increasing from ZWL$2.5 million to ZWL$37.5 million.
Life assurance will increase from ZWL$5 million to ZWL$75 million minimum capital requirements while Funeral assurance will be ZWL$37.5 million from ZWL$2.5 million.
Re-Insurance will increase from ZWL$5 million to ZWL$75 million while Micro-Insurance will also increase from ZWL$0.3 million to ZWL$4.5 million Zimbabwean dollars.
The proposals coincides with the Insurance and Pension Commission (IPEC) which has since been tasked to develop a risk-based capital framework, the Zimbabwe Integrated Capital and Risk Project (ZICARP), which will be launched in 2020.
The proposals are also sympathetic to policy holders and pension funds.
“It is recommended that the pension preservation amount be reviewed from the current ZWL$600 to ZWL$6,000 in order to ensure that the amount preserved is decent enough to warrant payment of a deferred pension at retirement, after meeting preservation expenses.
“It is further proposed that the minimum commutable pension be reviewed from ZWL$50 to ZWL$500 per month, in line with inflation developments in the economy,” said Ncube.
He further highlighted increased capacity production as the main thrust to any meaningful production, emphasizing that insurance business needs to self-introspect by adhering to strong corporate governance and accountability.