ZIMBABWE’S insurance sector regulator has threatened to crack the whip on short-term insurance players which failed to file returns in foreign currency business.
The weakening of the Zimbabwe dollar against major currencies saw some insurance companies seeking approval to take premiums in hard currency in order to hedge against inflation.
According to the latest Insurance and Pension Commission (Ipec) quarterly non-life insurance firms (also known as short-term insurers) report for the nine months ending September 2020, only three short-term insurance players submitted forex-denominated returns for the period ending 30 September 2020.
“The rest of the industry players did not respond to the Commission`s repeated call for the filling of returns relating to foreign currency denominated business in terms of Circular 15 of 2020. The Commission will, accordingly, institute appropriate regulatory sanctions to enforce compliance,” Ipec warned.
“Fire and motor insurance business classes contributed 65.64% of the total Gross Premium Written in foreign currency by the insurance players during the period under review.”
Total assets for short-term insurers, according to the insurance regulator, increased by 21.63% in nominal terms from ZW$5.56 billion reported as at 30 June 2020 to ZW$6.76 billion as at 30 September 2020.
“The increase in assets is mainly attributable to property revaluations, cash and cash equivalents and premium debtors which collectively accounted for 61.06% of the total assets. Premium debtors slightly decreased by 1.82% from ZW$1.54 billion as at 30 June 2020 to ZW$1.52 billion as at 30 September 2020,” the report shows.
“The slight decrease is reflective of the price and exchange rate stability witnessed during the last three months following the introduction of the Dutch Auction foreign exchange system.
“The Commission is, however, concerned by the high level of the premium debtors as this negatively impact on insurers` capacity to meet policyholders` claims as they fall due. In this regard, insurers are urged to strengthen their underwriting tools to reduce credit risk.”
The report further shows that investments in prescribed assets increased by 180.78% from ZW$102.49 million as at 30 June 2020 to ZW$287.76 million as at 30 September 2020.
“Only one out of the eighteen (18) short-term insurers was compliant with the minimum prescribed asset ratio of 10% as at 30 September 2020. Short-term insurers are urged to commit to their prescribed asset compliance roadmaps,” the report reads.
Turning to reinsurers, the report showed that five short-term reinsurers submitted forex-denominated returns for the period under review. The Gross Premium written by these players amounted to US$33.81 million.
“In terms of foreign currency denominated business, only five (5) out of the thirty-two (32) brokers completed returns in line with Circular 15 of 2020. The premium income generated by the entities amounted to US$6.78 million with total commission of US$1.07 million,” Ipec said.