THE uptake of United States-denominated short-term insurance products rose by 48% to nearly US$68 million by year 2021 compared to prior comparative period as confidence in Zimbabwe’s domestic currency dampened on the back of rising inflation, a report by the country’s insurance regulator has shown.
BERNARD MPOFU
Officially, the Zimbabwe dollar depreciated against the US dollar in the fourth quarter, shedding 31.44% to close at an average of US$1:ZW$108.7. On the parallel market, the local unit was trading at 1:200 against the greenback.
Analysts say the marginal depreciation was due to high foreign exchange demand as businesses were gearing for re-stocking ahead of the festive season.
The Insurance and Pension Commission (Ipec) says United States dollar-denominated business written by the players improved during the period under review.
“The foreign currency-denominated gross premium written (GPW) for the 12 months ended 31 December 2021 increased by 49.87% from US$67.71 million reported during 2020 to US$101.48 million reported for the comparative period in 2021. Foreign currency-denominated business contributed 57% of the total business generated by short-term insurers during the period under review,” reads the Ipec report.
“During the year ended 31 December 2021, in terms of foreign currency-denominated GPW, Cell Insurance, Zimnat Lion and Old Mutual Insurance were the market leaders with a combined market share of 56%.”
The annual inflation decreased to 60.7% in December 2021, down from 362.6% registered in January 2021. The month-on-month inflation spiked in June and October 2021 due to acceleration in food and non-food inflation before slowing down towards the end of 2021.
The major sources of foreign currency-denominated business for short-term insurers, according to the insurance regulator, were motor and fire lines of business, contributing a combined 44.8% of the total business written for the 12 months ended 31 December 2021.
All 18 insurers reported capital positions that were above the minimum capital requirement of ZW$37.5 million as at 31 December 2021.
17 out of the 18 insurers that were operational were compliant with the minimum solvency margin of 25% as stipulated in the Insurance Act, the report further reads.
Total assets for short-term insurers increased by 125.82% from ZW$8.87 billion reported as at 31 December 2020 to ZW$20.03 billion reported as at 31 December 2021.
