ZIMBABWE’S insurance sector regulator says it may soon announce new United States dollar-indexed minimum capital requirements for short-term insurers as uptake of hard currency-backed products improves.
BERNARD MPOFU
According to the Insurance and Pension Commission (Ipec) short-term report for the half-year ended 30 June, total gross premium written (GPW) by the sector increased nominally by 200% from ZW$9.95 billion in June 2021 to ZW$29.84 billion during the comparative period in 2022.
Foreign currency-denominated business increased by 21% from US$54.9 million reported for the half-year ended 30 June 2021 to US$66.68 million for the current reporting period.
During the period under review, the Zimbabwe dollar lost its value from an average of US$1:ZW$142.40 as at 31 March 2022 to US$1:ZW$366.3 as at 30 June 2022, prompting the industry to switch to United States dollar-indexed products.
The depreciation was mainly driven by higher demand for foreign currency as a store of value, and forward exchange rate pricing due to high inflation expectations.
“Meanwhile the commission is finalising work on the draft Statutory Instrument for US dollar-indexed minimum capital requirements”, reads the report.
All 19 insurers, according to the report, reported capital positions that were compliant with the local currency-indexed minimum capital requirement of ZW$37.5 million as at 30 June 2022.
The total business written by short-term reinsurers increased by 191% from ZW$5.22 billion for the half year ended 30 June 2021 to ZW$15.20 billion during the period under review.
“In terms of foreign currency-denominated business, the reinsurers reported a 27% increase from US$41.35 million reported during the half-year of 2021 to US$52.54 million during the comparative in 2022, reads the Ipec report.
“Total assets reported by short-term insurers increased from ZW$13.95 billion as at 30 June 2021 to ZW$58.25 billion as at 30 June 2022. Investments in prescribed assets by short-term insurers increased by 304% from ZW$0.48 billion as at 30 June 2021 to ZW$1.94 billion as at 30 June 2022. Only one out of nineteen shortterm insurers was compliant with the minimum prescribed asset ratio of 10%. All the nineteen insurers reported capital positions compliant with the minimum capital requirement (MCR) of ZW$37.5 million.”
Short-term reinsurers, the report further reads, had an asset base of ZW$35.34 billion, reflecting a 272% increase from the ZW$9.51 billion reported as at 30 June 2021.
Investments in prescribed assets by short-term reinsurers increased from ZW$1.41 billion as at 30 June 2021 to ZW$4.64 billion.
“Four out of the nine (9) short-term reinsurers were compliant with the minimum prescribed asset ratio of 10%. All the short-term reinsurers were compliant with the minimum capital requirement of ZW$75 million,” the report reads.
