New guidelines for life insurance sector

Nqobile Bhebhe,[email protected] 

THE Insurance and Pensions Commission (Ipec) is working on a new investment guideline for life insurance companies while making significant progress on the development of a solvency stress testing framework.

This framework aims to assess how life insurers’ financial positions would respond to potential shocks, ensuring resilience and stability within the sector. 

In its 2024 half-year life assurance industry report, Ipec highlighted the need to update investment guidelines to reflect the evolving economic landscape since the last guideline was issued in 2013.

The report revealed that total investments in prescribed assets (PAs) by the life assurance sector amounted to ZWG643,94 million, equivalent to US$46,99 million at the official exchange rate. This represents an average compliance level of 9,3 percent across the sector. However, only three companies — CBZ Life, Econet Life, and Nhaka Life — met the minimum prescribed asset ratio of 15 percent of adjusted assets. 

“The Commission expects sector players to comply with the required PA ratio on an ongoing basis. Non-compliant entities are required to submit their compliance plans,” Ipec stated. 

Prescribed assets, which include bonds or securities issued by the Government, local authorities, quasi-Government organisations, or other approved entities, play a critical role in funding developmental projects. Over the years, these instruments have supported national economic growth and aligned with the Government’s Vision 2030.

“The life assurance sector is, therefore, encouraged to invest in bankable projects of national interest that align with Vision 2030 and create value for policyholders,” stated Ipec.  As of June 2024, 10 life insurance companies complied with the minimum capital requirement (MCR) of US$2 million, while two lagged behind. Ipec has engaged the non-compliant entities to ensure they submit actionable plans to meet the requirements once the enabling regulations come into effect.

The commission is also reviewing submissions under the Zimbabwe Integrated Capital and Risk Project (ZICARP), which were due on June 30, 2024. Players who have yet to comply have been urged to submit without delay.

ZICARP, launched in 2019, aims to enhance market discipline and boost confidence in Zimbabwe’s insurance sector. It comprises three key pillars: the Risk-Based Capital Framework, the Own-Risk and Solvency Assessment Framework (ORSA), and the Market Disclosure Framework. These components are expected to be finalised in the second half of 2025 following extensive industry consultations.

The solvency stress testing framework is nearing completion. It will enable Ipec to evaluate the resilience of life insurance companies’ balance sheets under various stress scenarios.

“The development of the solvency Stress Testing Framework is progressing well and will be utilised to conduct stress tests on the balance sheets of all life insurance companies to evaluate how each company’s financial position reacts to potential shocks impacting their operations,” Ipec noted.